IRS Late Tax Payment Penalty: Rates, Interest, and Abatement

The IRS late tax payment penalty is 0.5% of your unpaid tax for each month, or part of a month, that the balance stays outstanding, up to a maximum of 25% of the original tax owed.¹²³ Both charges start the day after the deadline passes.

How the Monthly Penalty Is Calculated

A partial month counts as a full month. One day into a new month triggers the entire 0.5% charge for that month. At the standard rate, the penalty hits its 25% ceiling after 50 months of nonpayment. Interest keeps running after the penalty caps out.

The rate isn’t fixed. Two situations change it:

If you filed your return on time and the IRS approves an installment agreement, the monthly rate drops to 0.25%.¹
If the IRS issues a notice of intent to levy and you don’t pay within 10 days, the rate doubles to 1% per month, which reaches the 25% cap in 25 months.¹

Interest on the Unpaid Balance

The IRS charges interest on any tax not paid by the original due date.⁴ The rate is the federal short-term rate plus three percentage points, adjusted quarterly.⁵ For individual taxpayers in the second quarter of 2026, that comes to 6%.²

Because interest compounds daily, each day’s interest is added to the balance and then earns its own interest. The 25% penalty ceiling doesn’t apply to interest. Over a long enough period, interest becomes the largest piece of what you owe.⁴

File Even If You Can’t Pay

The late filing penalty is much steeper: 5% of the unpaid tax per month, also capped at 25%.¹ When both penalties apply in the same month, the filing penalty is reduced by the payment penalty, so the combined charge is 5% per month rather than 5.5% (4.5% for filing plus 0.5% for paying).⁶ Filing on time drops your monthly exposure by a factor of ten.

A common and costly assumption: a filing extension does not extend the payment deadline.⁷ Form 4868 gives you six more months to submit the return, but the tax itself is still due in April. Filing an extension without paying starts the late payment penalty and interest running immediately on whatever you owe.

How to Stop the Penalty From Growing

Every dollar you pay lowers the balance that penalties and interest are calculated against, so a partial payment is worth making even if you can’t cover the full amount. The IRS accepts payment through several channels:⁸

IRS Direct Pay, a free bank transfer from a checking or savings account.
Debit or credit card through an approved third-party processor, which charges a fee.
The Electronic Federal Tax Payment System (EFTPS), used mainly for business and estimated taxes.
Your IRS Online Account, where you can see the current balance and pay from the same screen.

If you can’t clear the balance, an installment agreement cuts the monthly penalty rate in half, from 0.5% to 0.25%, provided you filed on time.¹ Interest keeps accruing during the plan, but at the standard rate. Paying as much as you can up front and then entering an installment agreement is usually the cheapest way to close out a balance you can’t handle in one payment.

Getting the Penalty Reduced or Removed

Two programs can eliminate the late payment penalty entirely. Interest is harder to get rid of, but wiping out the penalty still meaningfully reduces the total.

First Time Abate

If your compliance record is clean, the IRS may waive the failure-to-pay penalty (as well as failure-to-file or failure-to-deposit) under First Time Abate. You need to have filed all required returns for the three tax years before the penalty year and had no penalties during that period, unless a prior penalty was removed for a reason other than First Time Abate.⁹ You can request the abatement by phone or in writing. No special form is required to open the request.

Reasonable Cause

If something outside your control kept you from paying on time, the IRS may grant reasonable cause relief. The agency lists fires and natural disasters, inability to obtain records, serious illness, and the death of an immediate family member as examples.¹⁰ Expect to explain what happened and provide supporting documentation where you can. Some requests can be resolved over the phone; others require Form 843.¹¹

Interest Abatement Is Narrow

The IRS is required by law to charge interest, so most requests to remove it fail. The exception: interest can be abated when the delay was caused by an unreasonable IRS procedural or administrative error and you didn’t contribute to it.¹² Only the interest that accrued during the IRS error qualifies, not interest from before or after. These requests are filed on Form 843.

1
Office of the Law Revision Counsel. 26 USC 6651 – Failure to File Tax Return or to Pay Tax
2
Internal Revenue Service. Internal Revenue Bulletin 2026-08
3
Office of the Law Revision Counsel. 26 USC 6622 – Interest Compounded Daily
4
Office of the Law Revision Counsel. 26 USC 6601 – Interest on Underpayment, Nonpayment, or Extensions of Time for Payment of Tax
5
Office of the Law Revision Counsel. 26 USC 6621 – Determination of Rate of Interest
6
Office of the Law Revision Counsel. 26 USC 6651 – Failure to File Tax Return or to Pay Tax
7
Internal Revenue Service. Topic No. 304, Extensions of Time to File Your Tax Return
8
Internal Revenue Service. Pay Taxes on Time
9
Internal Revenue Service. Administrative Penalty Relief
10
Internal Revenue Service. Penalty Relief for Reasonable Cause
11
Internal Revenue Service. About Form 843, Claim for Refund and Request for Abatement
12
Internal Revenue Service. IRM 20.2.7 – Abatement and Suspension of Underpayment Interest