Interest

• The most common penalty for failing to file or pay taxes is to have interest charged on the amount that goes unpaid to the tax collecting agency. The longer a person is late, the more interest he will have to pay on the loan. For example, if an agency charges a person 1 percent interest for each month he is late and the person owes $100, after two months he will owe $102.
  
  

Penalties

• In addition--or, in some cases, in lieu of--interest penalties, a person will be required to pay a flat fee for filing late. Often this flat fee will only be applied if the penalty assessed in the form of interest on taxes is too low. For example, an agency may charge a person 1 percent interest for each month that he is late, but assess a minimum of $50 in penalty fees.
  
  

Extensions

• In lieu of filing taxes past the deadlines, many filers apply for an extension. An extension for taxes is just like an extension for a homework assignment in school. Instead of having to turn in and pay taxes on a certain date, a person gets to do so at a later date without penalty. The IRS is relatively liberal in giving out extensions. Applying for an extension will also not measurably raise a filer's chances of having his returns audited.
  
  

Tax Evasion

• Although criminal prosecutions for tax evasion are relatively rare, they do occasionally occur. While the IRS generally will choose to administer civil penalties, it sometimes will choose to charge a person who has willfully refused to pay taxes with a crime. In this case, the person will face steeper penalties beyond those laid out by the agency. In extreme cases, particularly those in which the defendant is unwilling to settle, the filer may be jailed.