IRS Penalty: Failure To File

Internal Revenue Code (IRC) Section: §6651(a)(1)

Other Names This Penalty Is Called: Penalty for Filing Return Late

How This Penalty Is Computed: 5% per MONTH on the unpaid balance!  This is not a typo.  This is not 5% per yearTHIS IS PER MONTH!  You don't ever want to see this penalty.  The maximum total penalty is 25%.  Even if you cannot pay your taxes, FILE YOUR RETURN ON TIME.  You are better off filing the return without a payment than not filing at all.

If the tax is due on April 15th, and the complete payment is made on April 16th, that is considered to be 1 month.

Lets say the $10,000 was due on April 15th of this year.  You file your return on April 16th.  Your Failure To File penalty for 1 month (actually 1 day) is 10,000 x .05 or $500.  The annualized interest rate is equivalent to 1,825% [(500/10000)x365].  And people complain that credit card interest is around 20%!  Naturally, I picked an extreme example, but this is possible.  If one paid the tax on May 15th, the annual interest rate equivalent would be 60% [(500/10000)x12].  If instead if paying the tax on April 16, you waited 6 months to file your tax return, the penalty would be $2,500 or 25% of $10,000.

This penalty is reduced by any Failure To Pay IRS penalty for the specific month.

The penalty will not be less than the lower of $100 or 100% of the tax.  Clearly, if the penalty at 5% per month exceeds $100, this provision does not apply.

When Does Interest Start To Run On This Penalty: In addition to this Failure To File penalty, interest runs on this penalty from the extended due date of the return.

How To Get Out Of This Penalty: Prove to the IRS that the penalty should be abated due to "reasonable cause".


It is our experience that tax professionals have better luck at getting IRS penalties abated.  If you work with a tax professional, we strongly recommend that you contact them about any IRS penalty issues.  It should also be pointed out that no one can guarantee that an IRS penalty will be abated.  You don't know that your plea for penalty abatement will work until you have an IRS letter stating that they will abate the penalty!

How to get the IRS/State Interest & Penalty Calculator:

Order Now! Special discounted price through 4/30/2022 $49. Regular Price $69. Order licenses for additional machines.

We also consult on IRS penalty abatement issues and IRS penalty computations.  You are welcome to call us at 1-800-326-6686.

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