The IRS failure-to-file penalty is 5% of the unpaid tax for each month or part of a month your return is late, up to 25% of the unpaid tax. It is ten times the failure-to-pay penalty rate, which is why filing on time matters even when you cannot pay. The penalty does not apply if you show the failure was due to reasonable cause and not willful neglect.
- Failure to file: 5% per month, up to 25% (IRC § 6651(a)(1)).
- Failure to pay: 0.5% per month, up to 25% (IRC § 6651(a)(2)). When both apply, the combined charge is 5% per month.
- Returns more than 60 days late carry a minimum penalty of $525 or 100% of the tax, whichever is less, for returns due in 2026.
- Fraudulent failure to file: 15% per month, up to 75% (IRC § 6651(f)).
- Relief may be available through reasonable cause or administrative relief based on your compliance history, including First Time Abate and the Automatic Exemption from Penalty.
It is an addition to tax imposed when you do not file a required return by its due date, including extensions. The authority is IRC § 6651(a)(1), which charges 5% of the amount required to be shown as tax for the first month late and an additional 5% for each additional month or fraction of a month, “not exceeding 25 percent in the aggregate.”
Two details affect the amount. The penalty base is not your gross tax liability. Under § 6651(b)(1), it is the tax required to be shown on the return reduced by amounts already paid and by credits you can claim, so the penalty runs on what you still owe. And a fraction of a month counts as a whole month. A return due April 15 and filed May 1 is charged for two full months.
| Penalty | Rate | Maximum | Authority |
|---|---|---|---|
| Failure to file | 5% of unpaid tax per month or part of a month | 25% | IRC § 6651(a)(1) |
| Failure to pay (tax shown on the return) | 0.5% per month or part of a month | 25% | IRC § 6651(a)(2) |
| Failure to pay after notice and demand | 0.5% per month, beginning 21 calendar days after notice and demand (10 business days if the amount is $100,000 or more) | 25% | IRC § 6651(a)(3) |
| Failure to pay during an installment agreement | 0.25% per month, if the return was filed on time | 25% | IRC § 6651(h) |
| Failure to pay after a final notice of intent to levy | 1% per month, beginning 10 days after the notice | 25% | IRC § 6651(d) |
| Fraudulent failure to file | 15% per month or part of a month | 75% | IRC § 6651(f) |
The 0.25% installment agreement rate applies only to individuals who filed on time, including extensions. Entering an IRS installment agreement after filing late does not reduce the rate.
If a return is filed more than 60 days after its due date, the failure to file penalty cannot be less than the lesser of 100% of the tax required to be shown on the return or a fixed dollar amount. That amount is adjusted for inflation under IRC § 6651(j) and is keyed to the calendar year the return was required to be filed. A 2025 return due in April 2026 uses the 2026 figure.
| Return required to be filed in | Minimum penalty (or 100% of the tax, whichever is less) |
|---|---|
| 2020 through 2022 | $435 |
| 2023 | $450 |
| 2024 | $485 |
| 2025 | $510 |
| 2026 | $525 |
| 2027 | $535 |
Sources: Rev. Proc. 2024-40 § 2.53 for returns filed in 2026 and Rev. Proc. 2025-32 § 4.52 for returns filed in 2027. The practical effect is that a small balance produces a disproportionate penalty. Owe $300 and file 70 days late, and the penalty is $300, the entire tax.
For any month in which both penalties apply, IRC § 6651(c)(1) reduces the failure-to-file penalty by the amount of the failure-to-pay penalty. The combined charge is 5% per month. Adding the two rates together, for 5.5%, overstates what a taxpayer owes.
Take a taxpayer who owes $2,000 and files three months late without paying.
- Failure to file before the offset: 5% × 3 months × $2,000 = $300
- Failure to pay: 0.5% × 3 months × $2,000 = $30
- Failure to file after the § 6651(c)(1) reduction: $300 − $30 = $270
- Total penalties: $300, plus interest
The two penalties do not stop at the same time. The filing penalty reaches its 25% cap after five months. The payment penalty keeps running until the tax is paid or it reaches its own 25% cap, so the combined ceiling is 47.5%.
One limit on the offset is easy to miss. It cannot reduce the filing penalty below the 60-day minimum described above.
Yes. Interest runs on unpaid tax from the original due date and also accrues on the penalties themselves. The rate for individual underpayments is the federal short-term rate plus three percentage points, reset quarterly and compounded daily. The IRS held the individual underpayment rate at 7% for the fourth quarter of 2026 and posts each quarter’s figure on its quarterly interest rates page.
Interest attributable to a penalty goes away when that penalty is removed, but the IRS will generally not abate interest on the tax itself.
Not on an individual income tax return. Both penalties are calculated as a percentage of unpaid tax, so a return with no balance due produces no penalty, however late it is. Partnership and S corporation returns follow different rules and can carry late-filing penalties even when no tax is due.
There is still a cost. Withholding counts as paid on the return’s original due date, and IRC § 6511(b)(2) limits a refund to tax paid within three years, plus any extension, before the claim. File a return more than three years late, and you generally lose the right to recover the withholding on it.
When the failure to file is fraudulent, IRC § 6651(f) substitutes 15% for 5% and 75% for 25% in the ordinary failure to file calculation. The result is 15% per month or part of a month, reaching the 75% maximum after five months.
Fraudulent failure to file is a separate penalty from the civil fraud penalty under IRC § 6663, and the two apply in different situations.
| Feature | Fraudulent failure to file, IRC § 6651(f) | Civil fraud, IRC § 6663 |
|---|---|---|
| When it applies | No return was filed, or a fraudulently late return | A return was filed containing a fraudulent underpayment |
| Rate | 15% per month | 75% of the portion of the underpayment attributable to fraud |
| Maximum | 75% | No monthly cap; it is a flat 75% of the fraudulent portion |
| Applies where no return was filed | Yes | No |
Section 6663 does not reach a non-filer. IRC § 6664(b) limits it to cases where “a return of tax is filed,” and a substitute return prepared by the IRS does not count. Where a fraudulent return was filed late, IRM 25.1.7 directs examiners to propose the § 6651(f) penalty and cautions that a court “is not likely to sustain the determination of both penalties unless compelling facts support” it.
The government carries the burden. IRC § 7454(a) places the burden of proof on the IRS, and Tax Court Rule 142(b) requires clear and convincing evidence. Failing to file is not enough on its own. The IRS looks for affirmative acts, such as concealing income or assets, and its fraud manual, IRM 25.1.2, states that “no one indicator of fraud is determinative.” Our article on how the IRS proves tax fraud covers the process in detail.
Relief falls into two categories. Reasonable cause depends on what kept you from filing on time, and you must prove it. Administrative relief, through First Time Abate or the newer Automatic Exemption from Penalty, depends on your compliance history instead.
Section 6651 excuses the penalty where the failure is “due to reasonable cause and not due to willful neglect.” Treas. Reg. § 301.6651-1(c)(1) supplies the test, which asks whether you exercised ordinary business care and prudence and were still unable to file on time. The showing must be made in a written statement signed under penalties of perjury.
| Generally supports reasonable cause | Generally does not |
|---|---|
| Serious illness or incapacity of the taxpayer or an immediate family member | Relying on a preparer to transmit the return |
| Death in the immediate family | Not having the money to pay the tax |
| Fire, casualty, or natural disaster | Forgetting the deadline or being too busy |
| Records destroyed or unobtainable through no fault of the taxpayer | Disagreeing with the tax law |
| Erroneous written advice that no return was required | A preparer error the taxpayer could have caught by reviewing the return |
Not for the act of filing. In United States v. Boyle, 469 U.S. 241 (1985), a unanimous Supreme Court held that relying on an agent does not excuse a late filing. The duty to meet a fixed deadline is non-delegable. Reliance on a professional’s advice that no return was required can still establish reasonable cause, even when the advice turns out to be wrong.
Courts that reached the question applied Boyle to e-filed returns. The Eleventh Circuit held in Lee v. United States, No. 22-10793 (11th Cir. 2023), that signing Form 8879 authorizes a preparer to transmit a return but does not transmit it. The Sixth Circuit, which covers Michigan, did not rule on the question, but a federal court within the circuit reached the same result in Intress v. United States, No. 3:18-cv-00851 (M.D. Tenn. 2019).
First Time Abate is administrative relief available to taxpayers with a clean three-year compliance history, granted without any showing of reasonable cause. It is governed by IRM 20.1.1.3.3.2.1 and must be requested. In summer 2026, the IRS began replacing it with a new relief called Automatic Exemption from Penalty (AEP), which works differently.
| Feature | First Time Abate | Automatic Exemption from Penalty |
|---|---|---|
| Periods covered | 2025 tax year and 2026 quarterly returns not considered for AEP, plus all prior periods | 2025 tax year returns and 2026 quarterly returns, and all later periods |
| How relief is granted | Taxpayer must contact the IRS to request it | Automatic, no taxpayer action required |
| Penalty assessment | Penalty is assessed, then removed | No penalty is assessed |
| Failure to pay penalty | May continue to accrue until the tax is paid | Not assessed on unpaid tax, though the tax and interest remain due |
The failure-to-pay row matters most. Under First Time Abate, the payment penalty could keep running after the filing penalty was removed. AEP requires a clean filing and payment history for the same return type over the prior three years, and under IRM 20.1.1.3.3.2.5 the return itself must be filed within three years of its original due date to be considered. First Time Abate ends for original returns due on or after January 1, 2027. Because the rollout is recent, check how your return was treated on the IRS administrative penalty relief page before relying on either program.
If you received a penalty notice, respond by the date on it. You can request First Time Abate by calling the toll-free number on the notice. For reasonable cause, submit a signed written statement with records that establish the timeline, such as medical records, death certificates, insurance claims, or correspondence. To request a refund or abatement of a penalty already paid, you can file Form 843, unless your IRS notice gives other instructions.
If the request is denied, you can generally appeal to the IRS Independent Office of Appeals. Appeals reviews the case independently of the examiner and can weigh the hazards of litigation in deciding whether to settle.
Our article on which events qualify for reasonable cause relief covers the qualifying circumstances in more depth, and our guide to reducing and eliminating IRS penalties covers the other penalty types.
The assessment clock never starts. Under IRC § 6501(c)(3), the IRS can assess tax for an unfiled year at any time. The IRS can also prepare a substitute return for you under IRC § 6020(b), and § 6651(g) treats that return differently for each penalty. It does not stop the failure-to-file penalty, but it counts as your return for the failure-to-pay penalty, which then runs on the tax it shows from the original due date.
For the broader consequences, including how substitute returns are calculated, see what happens if you don’t file your taxes, and for the letters the IRS sends about unfiled years, see our breakdown of IRS notices for unfiled tax returns.
Civil penalties and criminal charges are separate tracks. IRS Criminal Investigation opened 245 non-filer investigations nationwide in fiscal year 2025, according to its annual report. Willful failure to file is a misdemeanor under IRC § 7203, carrying up to one year in prison and a fine of up to $100,000 for each year charged.
The facts behind a § 6651(f) fraud penalty can also support a criminal referral, although a civil fraud penalty does not by itself mean one will follow. That overlap is why a fraud penalty assertion is not something to negotiate alone. Our article on whether you can go to jail for unpaid taxes covers the criminal statutes and sentencing.
Yes. The Michigan Department of Treasury assesses its own penalties and interest on late state returns, under a separate schedule and collection process, so resolving the federal side does not resolve the state side. Our Michigan tax defense page covers state penalties and collections.
Several years of unfiled returns raise more questions than the penalty itself. Which years get filed, what the IRS already assessed through substitute returns, whether reasonable cause or first-time relief applies, and whether anything in the file invites a fraud referral all interact. The order of those decisions affects the outcome.
Ayar Law handles IRS and Michigan tax controversy work for clients in Michigan and throughout the United States, including penalty abatement, unfiled returns, and criminal tax defense. To discuss your situation, request a case review or call us at (248)262-3400.
Reviewed by Venar Ayar, JD, LLM (Tax), founding attorney at Ayar Law. Last reviewed October 2026.
This page provides general information about federal and Michigan tax penalties. It is not legal advice, and reading it does not create an attorney-client relationship. Penalty amounts, inflation-adjusted figures, and IRS relief programs change, and the result in any matter depends on its own facts. Consult a licensed attorney about your situation.
