Penalties for Unpaid State Taxes

by Jonita Davis

Tax season is one of the most dreaded by Americans, especially taxpayers. Most suffer through the season, filing and paying their taxes. Others either forget or ignore those W-2 and W-9 forms that come in the mail. Those taxpayers do so at their own risk, as refusing to pay federal taxes ends with fines, audits and even jail time. Many forget, however, that there are penalties for unpaid state taxes, as well.


State tax funds that are unpaid do accumulate interest. It usually begins on the day after the state taxes are due. Some states like Massachusetts, also charge interest on unpaid penalty charges, as well. The interest charged is different in percentage fees charged on unpaid taxes. Those fees are usually charged once. Interest is charged daily until the entire debt is paid off. You can go to your state revenue office website to find the interest rates for unpaid state tax penalties. This rate is usually calculated using the prime rate with a few percentage points added.


States like Oklahoma will put a lien against the delinquent tax filer's property. In doing so, the state ensures that the owner pays his taxes before selling or trading the property. Liens are placed against both real and intellectual property, meaning that anything with value can be attached by the state. The lien lasts for a specific amount of time, 10 years in Oklahoma. Then it must be renewed. The state's lien supersedes any other, so even a mortgage company can't take possession of a home until the tax debt is paid.

Penalty Fee

A fee that occurs monthly is charged by most all of the states. It is usually a percentage of the taxes owed, but that number is added to the unpaid tax debt. In Utah, the charge is levied at the time the bill is paid. The amount of the fee varies by the amount of days it is delinquent. A return that is a month late is charge an additional fee of 10 percent of the tax bill. If the bill had been paid during the first week, the charge would have only been 2 percent.

Penalty for Intent

Many states have a penalty set aside to punish certain behaviors other than a late return. Additional fees are assessed for fraud-based unpaid taxes or taxes that are unpaid as a part or result of a deceptive act. Over-payments that are not immediately returned to the state are assessed penalty fees. Ignoring or evading taxes duties are also penalized with their own additional penalty rate. The highest penalty, however, is reserved for fraud.


Music to a delinquent taxpayer's ears, amnesty allows for "catching up" on those tax bills without the added penalties. For some taxpayers, this saves hundreds and sometimes thousands of dollars. One must pay special attention to the amnesty provisions. Massachusetts' 2009 amnesty period only goes from March 1 to April 30. Filing too early and too late will result in an extra bill that includes penalties.


Not every taxpayer has the means through which to pay their delinquent bills. States offer payment plans that are used to accommodate such a taxpayer. Most states apply their payments first to the penalties, then to interest, and last is the original tax bill. This ensures that all penalties are paid. You can request a payment plan from your state revenue office.

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