If you’ve filed your taxes late or failed to file your taxes at all, the sound of penalties and interest may sound intimidating. Penalties are calculated as 5% of the tax you owe for each month that your return is late, with a maximum limit of up to 25% of your tax liability. On the other hand, the interest rate varies as it is updated every three months and is based on the federal short-term rate plus 3 percent. This rate is updated every three months, and it compounds daily until the full tax liability is paid.
Learn more in this article by HomeWork Solutions.