Understanding the Failure-to-Pay Penalty

Even if you submitted your return on time, the IRS charges a failure-to-pay penalty if you don’t pay your taxes by the due date. This penalty is directly related to delinquent taxes and distinct from the failure-to-file penalty.

Up to a maximum of 25% of the overdue amount, the penalty is 0.5% of the unpaid taxes for each month (or part of a month) the tax stays unpaid. The IRS usually lowers the failure-to-file penalty by the amount of the failure-to-pay penalty if both apply in the same month. Usually, the total penalty for that month is 5% (4.5% for not filing and 0.5% for not paying).

The failure-to-pay penalty falls to 0.25% each month if you are on an IRS-approved payment plan. Unpaid taxes also incur interest, which is charged independently and runs until the whole debt is paid.

Though interest will carry on the leftover penalty balance until it, too, is paid, the penalty stops accumulating once the taxes are paid in whole. You may ask for penalty abatement or remission if you can demonstrate justifiable grounds for not paying on time.

The failure-to-pay penalty accumulates over time and can become really substantial; so, even if you cannot pay the whole sum, it is always preferable to pay as much as you can by the deadline.

This entry was posted on Saturday, April 5th, 2025 at 11:58 pm and is filed under Penalties & Interest. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.