The Failure to File Penalty applies if you don’t file your tax return by the due date. The Failure to File Penalty is 5% of the unpaid taxes for each month or part of a month that a tax return is late. The Penalty won’t exceed 25% of your unpaid taxes.
How do I know I owe the IRS the Penalty?
The IRS sends you a notice or letter if you owe the Failure to File Penalty. For more information, see Understanding Your IRS Notice or Letter.
How Does the IRS Calculate the Penalty?
IRS calculates the Failure to File Penalty based on how late you file your tax return and the amount of unpaid tax as of the original payment due date (not the extension due date). Unpaid tax is the total tax owed minus the amount paid through withholding, estimated tax payments, and allowed refundable credits.
IRS calculates the Failure to File Penalty in this way:
- The Failure to File Penalty is 5% of the unpaid taxes for each month or part of a month that a tax return is late. The Penalty won’t exceed 25% of your unpaid taxes.
- If you receive both a Failure to File Penalty and a Failure to Pay Penalty in the same month, then the amount of the Failure to Pay Penalty will be subtracted from the Failure to File Penalty for that same month. As a result, you will receive a combined penalty of 5% for each month or a portion of a month during which your tax return was not filed on time. For instance, instead of a 5% failure to file Penalty for the month, the IRS would impose a 4.5% failure to file Penalty and a 0.5% failure to pay Penalty.
- If you filed your tax return on time as an individual and you have an approved payment plan, the failure to pay Penalty is reduced to 0.25% per month (or partial month) during your approved payment plan.
- If you don’t pay your tax in 10 days after getting a notice from the IRS with an intent to levy, the failure to pay the Penalty is 1% per month or a partial month.
- The IRS applies full monthly charges, even if you pay your tax in full before the month ends.
Failure to pay tax you didn’t report on your return
If you owe tax that you didn’t report on your return or paid on time, the IRS calculates the failure to pay Penalty in this way:
- If the IRS finds that you owe tax you didn’t report on your return; it will send you a notice or letter with the amount due and a due date to pay. Due dates for this kind of notice are usually 21 calendar days from the date of the notice or ten business days after the IRS has sent the notice if the tax amount you owe is $100,000 or more.
- If you don’t pay your tax by the due date in the notice or letter, the IRS will send you a failure to pay Penalty, which is 0.5% of the tax you didn’t pay timely for each month or partial month that you don’t pay after the due date.
- If you filed your tax return on time as an individual and you have an approved payment plan, the failure to pay Penalty is reduced to 0.25% per month (or partial month) during your approved payment plan.
- If you don’t pay your tax in 10 days after getting a notice from the IRS with the intent to levy, the failure to pay Penalty is 1% per month or a partial month.
- The IRS applies full monthly charges, even if you pay your tax in full before the month ends.
Interest on a Penalty
IRS charges interest on penalties. The date from which it begins to charge interest varies by the type of Penalty. Interest increases the amount you owe until you pay your balance in full. For more information about the interest we charge on penalties, see Interest on Underpayments and Overpayments.
Pay a Penalty
Send the IRS a payment or pay your taxes in full to stop future penalties and interest from adding up. NexGen Taxes Pro can help you negotiate a payment plan.
Remove or Reduce a Penalty
IRS may be able to remove or reduce some penalties if you acted in good faith and can show reasonable cause for why you weren’t able to meet your tax obligations. By law, the IRS cannot remove or reduce interest unless the Penalty is removed or reduced.
NexGen Taxes Pros can help you remove or reduce the Penalty.
For more information, see Penalty Relief.
