The late-filing penalty is calculated from the tax that remained unpaid after the due date, reduced by withholding, estimated payments, and allowed refundable credits. A late return that is fully paid through withholding can have a different penalty result from a late return with a large balance.
Both penalties apply for a month or part of a month. The failure-to-file component reaches its cap after five months, while the failure-to-pay penalty can continue until it reaches its own cap or the tax is paid.
| Charge | General rate | General cap | Important interaction |
|---|---|---|---|
| Failure to file | 5% per month or part of a month | 25% of unpaid tax | Reduced to 4.5% in months when the 0.5% failure-to-pay penalty also applies |
| Failure to pay | 0.5% per month or part of a month | 25% of unpaid tax | Can change to 0.25% during an approved installment agreement or 1% after certain levy notices |
| 2026 minimum late-filing penalty | Applies when an income tax return is more than 60 days late | Smaller of $525 or 100% of tax required to be shown | The dollar amount is tied to the year the return is required to be filed |
A zero-balance return changes the math
The percentage penalty is based on unpaid tax, not gross income. Filing still matters even when withholding covered the tax, but the late-filing calculation may be zero if no tax remained unpaid. Other return-specific penalties can still apply.