Interest and Penalties

Interest. We are required by law to charge interest when you do not pay your liability on time. Generally, we calculate interest on any unpaid balance from the due date of your return (regardless of extensions of time to file) until you pay the amount you owe in full, including accrued interest and any penalty charges. Interest on some penalties accrues on any unpaid balance from the date we notify you of the penalty until it is paid in full. Interest on other penalties, such as failure to file a tax return, starts from the due date or extended due date of the return. Interest rates are variable and may change quarterly. See section 6601.

Penalty for late filing of return. If you do not file a return by the due date, including extensions, you may have to pay a penalty of 5% of the unpaid tax for each month or part of a month the return is late, up to a maximum of 25% of the unpaid tax. The penalty will not be imposed if you can show that the failure to file on time was due to reasonable cause. If you file late, you may attach a statement to Form 5330 explaining the reasonable cause.

Penalty for late payment of tax. If you do not pay the tax when due, you may have to pay a penalty of ¹ /2 of 1% of the unpaid tax for each month or part of a month the tax is not paid, up to a maximum of 25% of the unpaid tax. The penalty will not be imposed if you can show that the failure to pay on time was due to reasonable cause.

Interest and penalties for late filing and late payment will be billed separately after the return is filed.