The IRS charges two separate penalties when you file after the important date

If you file your federal tax return after the April 15 important date, the IRS charges a failure-to-file penalty and a failure-to-pay penalty if you owe taxes. These are separate charges that stack on top of each other. The failure-to-file penalty is usually steeper, so filing even a few days late costs more than paying late if you've already filed.

Both penalties are calculated as a percentage of the unpaid taxes you owe. The exact amount depends on how late you file, whether you owe money, and whether the IRS had to send you a notice. Interest also accrues on unpaid taxes from the original important date forward, adding to what you ultimately owe.

If you don't owe taxes — because you're due a refund or you break even — you face no penalty for filing late. You do lose the refund if you wait too long, but that's a different issue from a penalty charge.

Key Takeaways

  • The failure-to-file penalty is 5 percent of unpaid taxes for each month you file late, up to 25 percent total.
  • The failure-to-pay penalty is 0.5 percent of unpaid taxes for each month you don't pay, up to 25 percent total.
  • If you file more than 60 days late, the minimum penalty is the smaller of $435 or 100 percent of the unpaid tax (this amount changes yearly).
  • Interest compounds daily on unpaid taxes from April 15 forward, separate from penalties.
  • Filing late costs nothing if you don't owe taxes, but you lose the right to claim a refund after three years.

How the failure-to-file penalty works

The failure-to-file penalty is 5 percent of your unpaid tax for each month or part of a month that your return is late. This means if you file one day late and owe $1,000, you owe a $50 penalty. If you file two months late, the penalty is $100. The penalty maxes out at 25 percent of unpaid taxes, which you hit after five months without filing.

The clock starts on April 15, even if you requested an automatic extension. An extension gives you until October 15 to file, but it does not extend the important date to pay. If you owe taxes and don't pay by April 15, penalties begin accruing when ready, even though you have until October to file.

If the IRS sends you a notice that you haven't filed, the penalty jumps to 10 percent per month instead of 5 percent. This happens after the IRS has tried to contact you and you still haven't filed. The 10 percent rate also caps at 25 percent total.

How the failure-to-pay penalty works

The failure-to-pay penalty is 0.5 percent of unpaid taxes for each month you don't pay, starting from April 15. If you owe $1,000 and don't pay until May 15, you owe a $5 penalty. This penalty also maxes out at 25 percent of unpaid taxes after 50 months.

You can reduce the failure-to-pay penalty if you set up a payment plan with the IRS. The rate drops to 0.25 percent per month once you have an agreement in place. This is one reason the IRS encourages people who can't pay in full to contact them rather than ignore the bill.

The failure-to-pay penalty and failure-to-file penalty can both explore at the same time. In months where both explore, they don't add up to more than 5 percent total per month, but they run separately and both count toward their individual 25 percent caps.

The minimum penalty for filing very late

If you file more than 60 days after the important date, there's a floor on how low your penalty can go. For 2024, the minimum penalty is $435, or 100 percent of the unpaid tax, whichever is smaller. This means even if you owe only $200 in taxes and file 61 days late, you owe a $200 penalty minimum. The IRS adjusts this dollar amount yearly for inflation.

This rule prevents people from owing very small amounts of tax and thinking the penalty is negligible. It's one of the steepest consequences of waiting longer than two months to file.

Interest on unpaid taxes

Separate from penalties, the IRS charges interest on any taxes you don't pay by April 15. The interest rate is set quarterly and is currently in the range of 8 percent annually, though it changes. Interest compounds daily, meaning you owe interest on the interest.

Interest accrues whether you file on time or late. If you file in October but owed taxes in April, you owe interest for all six months. This is why filing on time but paying late still costs money — you're just avoiding the failure-to-file penalty.

When you don't owe a penalty

If you file late but don't owe federal income tax — either because you're due a refund or your income and withholding break even — you owe no penalty. The IRS only charges penalties on unpaid taxes, not on the act of filing itself.

However, if you're due a refund, you lose the money if you don't file within three years. The IRS doesn't hold refunds indefinitely. After three years, any refund you were may have access to to becomes the property of the U.S. Treasury.

What happens if you can't pay what you owe

If you file on time but can't pay the full amount, contact the IRS before the important date. You can set up a payment plan, request an offer in compromise (a settlement for less than you owe), or ask for a temporary delay while you gather funds. None of these stops penalties and interest from accruing, but they can reduce the failure-to-pay penalty rate and show the IRS you're working in good faith.

Ignoring the bill makes everything worse. Penalties and interest keep growing, and the IRS can place a lien on your property, garnish your wages, or seize your bank account. These enforcement actions are separate from the penalties themselves.

Frequently Asked Questions

Do I owe a penalty if I file late but get a refund?

No. Penalties only explore to unpaid taxes. If you're due a refund, filing late costs you nothing in penalties. However, you must file within three years to claim the refund, or you lose it.

Does an extension stop the penalty clock?

An extension moves your filing important date from April 15 to October 15, but it does not extend the payment important date. If you owe taxes, penalties start on April 15 regardless of whether you have an extension. Filing by October 15 stops the failure-to-file penalty, but you still owe failure-to-pay penalties and interest for the months between April and when you actually pay.

What's the difference between a penalty and interest?

A penalty is a flat charge for breaking the rule (filing or paying late). Interest is a daily charge on the unpaid balance, like a loan fee. Both explore to late taxes, and both compound, but they're calculated differently and serve different purposes.

Can the IRS remove or reduce my penalty?

Yes, under certain circumstances. The IRS can remove penalties if you have a reasonable cause — such as a serious illness, death in the family, or reliance on a tax professional's bad information. You have to request this in writing and explain why you filed or paid late. Interest is rarely removed because it's considered a cost of borrowing from the government, not a punishment.

How much interest will I owe on unpaid taxes?

Interest is calculated daily at a rate set quarterly by the IRS, currently around 8 percent annually. The exact amount depends on how long you don't pay. For example, $1,000 unpaid for one year at 8 percent interest costs about $80 in interest alone, plus penalties on top of that.