The penalty for filing taxes late with the IRS generally consists of two parts: a failure-to-file penalty and a failure-to-pay penalty. Failure-to- file penalty:
- This penalty is 5% of the unpaid tax owed for each month or part of a month that the tax return is late.
- It is capped at a maximum of 25% of the unpaid tax.
- If the return is more than 60 days late, the minimum penalty is either $525 (for 2025 returns) or 100% of the unpaid tax, whichever is less.
- The penalty stops increasing after five months (reaching the 25% cap) but other penalties and interest may continue to accrue
Failure-to-pay penalty:
- This penalty is 0.5% of the unpaid tax for each month or part of a month the tax remains unpaid.
- It also caps at 25% of the unpaid tax.
- If both failure-to-file and failure-to-pay penalties apply in the same month, the failure-to-file penalty is reduced by 0.5%, so the combined penalty is 5% per month.
- Interest on unpaid taxes accrues separately and compounds daily, with the current interest rate around 7-8% annually
Summary:
- Late filing penalty: 5% per month up to 25% max.
- Late payment penalty: 0.5% per month up to 25% max.
- Minimum penalty for filing over 60 days late: $525 or 100% of tax owed, whichever is less.
- Interest also accrues on unpaid taxes until paid in full.
If you expect a refund, there is no penalty for filing late, but you must file within three years to claim it
. Taxpayers may qualify for penalty relief under certain conditions, such as reasonable cause or first-time penalty abatement
. In essence, the longer you delay filing and paying taxes owed, the higher the financial penalties and interest you will face. Prompt filing and payment minimize these costs.
