Penalty and Interest Rates
Penalty is calculated at 2% per month or partial month to a maximum of 20% on the unpaid principal of tax due.
Interest accrues daily on the unpaid principal of tax due and can change on a quarterly basis.
Current Interest Rates
Interest accrues on tax that isn’t paid on or before the due date of your return even if you receive an extension of time to file. Interest by law cannot be waived. Prior to January1, 2008, interest is calculated at the statutory rate of 15% per year and is computed on a daily basis. Beginning January1, 2008, interest is calculated on a daily basis at the rate set for individual income tax purposes by the U.S. Internal Revenue Code (IRC).
Table of Effective Interest Rates
| Prior to January 1, 2008 |
15% |
0.041% |
| Jan. 1, 2008 - Mar. 31, 2008 |
7% |
0.019125683% |
| Apr. 1, 2008 - Jun. 30, 2008 |
6% |
0.016393442% |
| July 1, 2008 - Sep. 30, 2008 |
5% |
0.013661202% |
| Oct. 1, 2008 - Dec. 31, 2008 |
6% |
0.016393442 % |
| Jan. 1, 2009 - Mar. 31, 2009 |
5% |
0.013661202% |
| Apr. 1, 2009 - Jun. 30, 2009 |
4% |
0.010958904% |
| July 1, 2009 - Sep. 30, 2009 |
4% |
0.010958904% |
| Oct. 1, 2009 - Dec. 31, 2009 |
4% |
0.010958904% |
| Jan. 1, 2010 - Mar. 31, 2010 |
4% |
0.010958904% |
| Apr. 1, 2010 - Jun. 30, 2010 |
4% |
0.010958904% |
| July 1, 2010 - Sep. 30, 2010 |
4% |
0.010958904% |
| Oct. 1, 2010 – Dec. 31, 2010 |
4% |
0.010958904% |
| Jan. 1, 2011 - Mar. 31, 2011 |
3% |
0.008219178% |
| Apr. 1, 2011 - Jun. 30, 2011 |
4% |
0.010958904% |
| July 1, 2011 - Sep. 30, 2011 |
4% |
0.010958904% |
| Oct. 1, 2011 – Dec. 31, 2011 |
3% |
0.008219178% |
| Jan. 1, 2012 - Mar. 31, 2012 |
3% |
0.008196721% |
Apr. 1, 2012 - Jun. 30, 2012
July 1, 2012 - Sep. 30, 2012
Oct. 1, 2011 - Dec. 31, 2012 |
3%
3%
3% |
0.008196721%
0.008196721%
0.008196721% |
The formula for calculating daily interest is:
Tax due × daily interest rate for the quarter × number of days late = interest due.
For example, say that you owe $300 for the 4th quarter of 2010, due January 15, 2011. The daily rate for the 1st quarter of 2011 is 0.008219178%. If the tax-due date is January15, 2011, and you are paying on January 30, 2011, the payment is 15 days late. Using the formula—
Multiply $300 × 0.00008219178 × 15 = $0.37
The negligence penalty for late filing or late payment applies if you file late and owe tax, or if you do not pay your tax when due. The penalty is 2% of the tax due for each month or part of a month the return is not filed or the tax is not paid, to a maximum of 20%.
This penalty applies when your failure to file or pay is because of negligence or disregard of the rules and regulations but without intent to defraud.