How Much Is the IRS Failure to Pay Penalty?

The IRS failure to pay penalty is 0.5% of your unpaid tax for each month or partial month the balance stays outstanding, up to a maximum of 25% of what you originally owed.¹ The rate starts the day after your return’s due date and keeps running until you pay in full or hit the cap. Two things change that rate: it doubles to 1% per month if you ignore a levy notice, and it drops to 0.25% if you’re paying under an approved installment agreement.

How the Monthly Charge Is Calculated

The 0.5% applies to the tax that was due and unpaid on the original filing deadline, which is April 15 for most individual returns.¹ The percentage runs against the tax itself, not against penalties or interest that have already been added to your account.

The “partial month” language in the statute is where people miscount. Even one day into a new month counts as a full month for penalty purposes.² If you owe $10,000 and pay nothing, the first month costs you $50. Two months and one day later, the IRS treats that as three full months, so you’re at $150.

When the Rate Doubles to 1%

The 0.5% rate is a floor. If the IRS sends a notice of intent to levy your property and you don’t pay within 10 days, the monthly rate jumps to 1%.² The same increase applies if the IRS demands immediate payment under its authority to seize assets.³

At the doubled rate, a $15,000 debt accrues $150 in penalty each month instead of $75, and the 25% ceiling arrives in roughly 25 months rather than 50. Ignoring IRS mail is what triggers this shift, so the cost of not opening the envelope is real.

When the Rate Drops to 0.25%

If you filed your return on time and the IRS approves an installment agreement, the monthly rate falls from 0.5% to 0.25% for every month the agreement stays in good standing.⁴ On a $5,000 balance, that’s the difference between $25 and $12.50 a month. The reduced rate lasts as long as you keep making payments on schedule.

Setup fees depend on the type of plan and how you apply. A short-term plan of 180 days or less has no setup fee. A long-term plan with direct debit costs $22 online or $107 by phone or mail. A long-term plan with other payment methods costs $69 online or $178 by phone or mail. Low-income taxpayers, defined as those with adjusted gross income at or below 250% of the federal poverty level, pay $43 for the non-direct-debit plan and may have that amount reimbursed after completing the agreement; the direct-debit setup fee is waived entirely.⁵

The 25% Cap

The total failure to pay penalty cannot exceed 25% of your unpaid tax, no matter how long the balance sits.² At the standard 0.5%, that takes roughly 50 months. At 1%, about 25 months.

Once the penalty maxes out, it stops accruing. Interest does not. Interest on the unpaid balance keeps running indefinitely, so hitting the cap doesn’t cap your total debt.

Filing Extensions Don’t Extend Time to Pay

Filing Form 4868 gives you six extra months to submit the return. It gives you no additional time to pay. The failure to pay penalty starts on the original due date regardless of any extension.⁶

There is one safe harbor. You can avoid the failure to pay penalty during the extension period if you meet both of the following:

You paid at least 90% of your total tax liability by the original due date through withholding, estimated payments, or a payment submitted with Form 4868.
You pay the remaining balance when you file the extended return.

Hit both marks and the IRS treats the extension period as having reasonable cause.⁶ Miss either one and the penalty applies from the original April deadline. Interest still accrues on any unpaid amount either way.

When Both the Late-Filing and Late-Payment Penalties Apply

If you file late and pay late in the same month, the two penalties don’t simply stack. The failure to file penalty is 5% per month, and it gets reduced by the 0.5% failure to pay penalty for any month both apply. The combined charge is 5% per month, not 5.5%.⁷

On a $2,000 balance, that’s $100 a month total: $10 in failure to pay and $90 in failure to file. After five months, the failure to file penalty hits its own 25% cap, but the failure to pay penalty keeps accruing separately until it reaches its own 25% limit.¹

One more wrinkle for very late filers. If your return is more than 60 days past due, the minimum failure to file penalty is $525 or 100% of your unpaid tax, whichever is less. That minimum applies to returns due after December 31, 2025.⁷ A small balance filed more than two months late can still trigger a floor penalty that feels out of proportion to what you owed.

Interest on Top of the Penalty

Interest runs alongside the penalty from the original due date until you pay in full. The rate equals the federal short-term rate plus three percentage points, and it compounds daily.⁸ Daily compounding means each day’s interest is calculated on the previous day’s balance, including interest already accrued, so the amount grows faster than a plain annual rate would suggest.

The rate is adjusted quarterly. For the first quarter of 2026, the individual underpayment rate was 7%.⁸ For the second quarter of 2026, the rate dropped to 6%.⁹ Interest has no cap. It keeps running until the balance reaches zero, even after every penalty has maxed out.

Getting the Penalty Reduced or Removed

Three main paths lead to relief, and it’s worth asking about them before the balance grows further.

First-Time Penalty Abatement

If your compliance record is clean for the three tax years before the year being penalized, you can request first-time abatement. This administrative waiver covers the failure to pay penalty, the failure to file penalty, and the failure to deposit penalty.¹⁰ A clean record means all required returns filed for those three years and no unresolved penalties during that period. You can request it by phone or by letter, and no special form is required. The IRS is supposed to consider first-time abatement before evaluating other grounds, so it’s the first thing to ask about.

Reasonable Cause

If first-time abatement doesn’t apply, you can argue that circumstances beyond your control prevented timely payment. The IRS accepts reasons that include serious illness or hospitalization, natural disasters, inability to access your records, and system issues that delayed an electronic filing or payment.¹¹ Documentation is expected: hospital records with dates for a medical issue, or evidence tying a natural disaster to your area and the missed deadline. The IRS also abates penalties when a taxpayer relied on erroneous written advice from the IRS itself, but you’ll need copies of both your written request and the written response.

Formal Refund or Abatement Request

For a formal request, file Form 843 (Claim for Refund and Request for Abatement).¹² The form asks for the tax period, the dollar amount of the penalty, and the Internal Revenue Code section under which it was assessed, all of which appear on your IRS notice. Line 8 is where you explain the basis for relief and attach supporting documentation. Both spouses sign if the underlying return was joint. The form goes to the IRS service center where you’d normally file your current-year return.

1
Internal Revenue Service. Failure to Pay Penalty
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Office of the Law Revision Counsel. 26 USC 6651 – Failure to File Tax Return or to Pay Tax
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Internal Revenue Service. Information About Your Notice, Penalty and Interest
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Internal Revenue Service. Topic No. 653, IRS Notices and Bills, Penalties and Interest Charges
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Internal Revenue Service. Payment Plans; Installment Agreements
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Internal Revenue Service. Application for Automatic Extension of Time to File U.S. Individual Income Tax Return
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Internal Revenue Service. Failure to File Penalty
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Internal Revenue Service. Quarterly Interest Rates
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Internal Revenue Service. Internal Revenue Bulletin 2026-08
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Internal Revenue Service. Administrative Penalty Relief
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Internal Revenue Service. Penalty Relief for Reasonable Cause
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Internal Revenue Service. Instructions for Form 843