Articles · Basics · IRS Compliance, Penalties, and Ethics
IRS Penalties: Failure to File vs. Failure to Pay
Section 6651 imposes separate penalties for filing late and paying late. Filing on time matters even when a taxpayer cannot pay, because the late filing penalty is much larger.
The rates
The failure-to-file penalty is generally 5% of unpaid tax for each month or part of a month, up to 25%. The failure-to-pay penalty is generally 0.5% a month, up to 25%. When both apply in a month, the filing penalty is reduced by the payment penalty, making a combined 5%.
Interest also accrues on unpaid tax and penalties.
An extension is not a payment plan
Form 4868 gives individuals more time to file, but not to pay. Paying a good estimate with the extension helps reduce penalties and interest. A taxpayer who cannot pay should still file, then ask about a payment plan.
Getting relief
Reasonable cause relief can apply when the taxpayer exercised ordinary care but could not comply, for example because of a serious illness or disaster. First-time abatement can remove certain penalties for a taxpayer with a clean three-year history who has filed required returns and paid or arranged to pay.
Taxpayers can usually ask by phone or in writing.
Key takeaways
- File on time even if you cannot pay.
- Extensions do not extend the time to pay.
- First-time abatement is worth checking.
For general education only, not tax advice. Tax law changes often, so confirm current rules and amounts with primary sources.