When an IRS tax obligation isn’t paid on time, the IRS will begin by charging a penalty of ½ of one percent of the unpaid tax obligation per month following the date the tax was due.
If the tax liability remains unpaid, the IRS will eventually issue an Intent to Levy notice. Then it will increase the late payment penalty to one percent per month…
Tax liabilities that are 50 months past due will have reached the maximum 25% late payment penalty.
With this in mind, it is often advisable to designate voluntary payments to the tax portion of the most recent tax liability for which you owe.
Once the tax portion has been paid off on all delinquent periods, then designate payments to the penalties in the same order…
However, every situation is different! It’s best to speak to a tax professional who can help you make the best decision.