Late Payment Penalty Relief

Post Date: 3/27/13
Last Updated: 3/27/13

Summary

Cross References
- IRC §6651(a)(2)
- Notice 2013-24

When a taxpayer files for an extension, the taxpayer avoids the penalty under IRC section 6651(a)(1) for filing the tax return late. However, the extension generally does not avoid the penalty under IRC section 6651(a)(2) for paying the tax late. Thus, if an extension is filed, the taxpayer must still estimate the tax due and pay it with the extension request by the due date of the return. The penalty for paying late is 0.5% of the tax due per month, not to exceed 25% in the aggregate.

On January 2, 2013, Congress enacted the American Taxpayer Relief Act of 2012 (Public Law 112-240). The new law affected a number of tax forms. Revising those forms required extensive programming and testing of IRS systems, which delayed the IRS’s ability to release, accept, and process those forms. These delays may have affected the ability of some taxpayers to timely estimate and pay their 2012 tax liability when requesting an extension of time to file their return.

As a result, the IRS has granted penalty relief for the late payment of tax under certain circumstances. For each taxpayer who files for an extension to file a 2012 income tax return that includes one of the forms listed in Exhibit 1, below, the IRS will deem the taxpayer to have met the reasonable cause exception to the late payment penalty under IRC section 6651(a)(2). The taxpayer must still make a good faith effort to estimate the tax liability on the extension request and pay the estimated amount by the original due date of the return. Any additional tax owed when the return is filed will not be subject to the late payment penalty under IRC section 6651(a)(2), provided the balance due is paid by the extended due date of the return.

When responding to an assessment notice from the IRS, the taxpayer should submit a letter describing the taxpayer’s eligibility for this penalty relief, identifying which of the forms in Exhibit 1 was included with the tax return and referencing Notice 2013-24.

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