Penalty & Interest
TAX YEARS 2015 AND PRIOR:
INTEREST: The rate of interest is 6% per annum (1/2% per month)will apply to all 2015 and prior tax returns and underpayment of estimate tax (Form 2210) even if filed after 1/1/2016.
PENALTY: The penalty for not paying timely is 5% for each of the first 5 months and an additional 1-1/2% per month thereafter. This is for withholding and net profit returns for 2015 and prior years regardless of when filed.
2210 PENALTY: The penalty for not paying quarterly estimates is calculated at the rate of 1-1/2% per month from the estimate due date until paid or April 15th whichever is earlier. This penalty will apply to 2015 and prior year returns even if filed after 1/1/2016.
TAX YEARS 2016 AND BEYOND:
INTEREST: Interest for the year is based on the Federal Short Term Rate as of July of the prior year rounded to the nearest whole percent, plus 5%, thus the rate will change for each succeeding year based on the Federal rate of the previous July. The rate will be posted in October for the upcoming year.
2016 interest rate is 5%. Calculated using the July 2015 Federal Short Term rate of .48%--rounded down to the nearest whole percent of 0% plus 5% gives us a rate of 5% per annum (annual rate) for 2016. This translates into a monthly rate of .4167%.
2017 interest rate is 6%. Calculated using the July 2016 Federal Short Term rate of .71%--rounded up to the nearest whole percent of 1% plus 5% gives us a rate of 6% per annum (annual rate) for 2017. This translates into a monthly rate of .5%
Withholding: 50% of the amount not timely paid (a one-time charge)
Net Profit Returns and late estimate payments: 15% of the amount not timely paid (this is a one-time charge)
Penalty for failure to file timely (New for 2016): Except for estimate payments - Failure to file any withholding monthly, quarterly or W-3 form and any net profit tax return, there will be a $25 charge for each month or fraction thereof that the return remains unfiled not to exceed $150 for each such failure.