For individual income tax returns, tax is to be paid on the due date of the return, usually April 15. If the tax is not paid by the due date of the return, interest is charged at the rate in effect from that period to the date of payment in full. Interest is compounded daily and adjusted quarterly.

Section 6601 of the Internal Revenue Code provides for interest on underpayment, nonpayment, or extensions of time for payment, of tax. Generally, if any amount of tax imposed by the Internal Revenue Code "is not paid on or before the last date prescribed for payment, interest on such amount at the underpayment rate established under Section 6621 shall be paid for the period from such last date to the date paid."

For individual income tax returns, the return is to be filed on the due date. If the return is not filed, and tax is owed and not paid by the due date of the return, failure to file penalty is charged. The penalty amount is 5 percent of the outstanding tax amount per month for the first month, with an additional 5 percent for each month or part of a month. The penalty is charged until the return is filed and the tax is paid, or the penalty assessed is 25 percent of the tax amount owed. The penalty is assessed on net tax due, tax amount after deducting payments and credits.

Section 6651 of the Internal Revenue Code provides for penalty assessments in addition to tax and interest for certain conditions. In case of 6651(a)(1) failure to file any return required under authority of the Internal Revenue Code "unless it is shown that such failure is due to reasonable cause and not due to willful neglect, there shall be added to the amount required to be shown as tax on such return 5 percent of the amount of such tax if the failure is for not more than 1 month, with an additional 5 percent for each additional month or fraction thereof during which failure continues, not exceeding 25 percent in the aggregate."

For individual income tax returns, the tax is to be paid and the return filed on the due date. If the return is filed, and tax is owed and not paid by the due date of the return, failure to pay penalty is charged. The penalty amount is 0.5 percent of the outstanding tax amount per month for the first month, with an additional 0.5 percent for each month or part of a month. The penalty is charged until the tax is paid in full, or the penalty assessed is 25 percent of the tax amount owed. The penalty is assessed on net tax due. This penalty is increased to 1 percent per month or part of a month once the Internal Revenue Service makes notice and demand for immediate payment.

Section 6651(a)(2) - In case of failure to pay the amount shown as tax on any return "on or before the date prescribed for payment of such tax (determined with regard to an extension of time for payment), unless it is shown that such failure is due to reasonable cause and not due to willful neglect, there shall be added to the amount shown as tax on such return 0.5 percent of the amount of such tax if the failure is for not more than 1 month, with an additional 0.5 percent for each additional month or fraction thereof during which such failure continues, not exceeding 25 percent in the aggregate."

The Restructuring and Reform Act of 1998 provides for a reduction in the failure to pay penalty. The penalty is reduced when the return is timely filed and the taxpayer enters in to an installment agreement prior to the Internal Revenue Service notice and demand for immediate payment. The penalty is reduced only if the taxpayer timely filed the return relating to the liability that is subject to the installment agreement. Late filed returns do not received the reduction in the failure to file penalty. The penalty amount will be reduced to half the usual rate, from .5 percent to .25 percent per month, for any month in which an installment agreement with the Service is in effect. This reduction will be effective for months beginning after December 31, 1999.

Section 6651(h) - Limitation on penalty on individual's failure to pay for months during period of installment agreement (effective Dec. 31, 1999). In the case of an individual who files a return of tax on or before the due date for the return (including extensions), paragraph (2) of subsection (a) "shall be applied by substituting 0.25 for 0.5 each place it appears for purposes of determining the addition to the tax for any month during which an installment agreement under section 6159 is in effect for the payment of such tax."

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