There is no single IRS penalty rate. For many individual income tax returns, late filing generally starts at 5% per month or part of a month, while late payment generally starts at 0.5%. Different rules apply when both penalties overlap, and interest is a separate charge. [1][2]
Common penalties for an individual income tax balance
| Charge | General rule | What to check |
|---|---|---|
| Failure to file | 5% of unpaid tax per month or part of a month, up to 25% | Whether a valid filing extension or other relief applies |
| Failure to pay | Usually 0.5% of unpaid tax per month or part of a month, up to 25% | Whether a different rate applies under the collection or payment-plan rules |
| Interest | A separate accrual governed by IRS interest rules | The period, applicable rates, and outstanding amounts |
These are common income-tax rules, not a schedule covering every business, information-return, deposit, or accuracy-related penalty. Identify the penalty named on the notice before doing arithmetic. [1][2]
What happens when both penalties apply?
For a month when both apply at their usual rates, the failure-to-file component is reduced by the failure-to-pay component. The usual combination is therefore 4.5% plus 0.5%, not 5% plus 0.5%. Each penalty has its own duration and limits. [1][2]
As a simplified one-month example, assume $4,000 of unpaid tax, no extension, no special relief, and the ordinary rates. The components would be $180 for late filing and $20 for late payment, totaling $200 before interest. This illustration does not cover the separate minimum penalty for a return more than 60 days late.
What is the minimum late-filing penalty in 2026?
For covered Forms 1040 and 1120 due during 2026 and filed more than 60 days late, the IRS lists a $525 minimum, limited to 100% of the underpayment if that amount is smaller. Match the minimum to the return’s original due-date year rather than the calendar year in which you happen to read the notice. [1]
Does a filing extension stop late-payment charges?
A filing extension generally gives more time to file, not more time to pay. Filing on time remains useful even when you cannot pay the balance in full. An approved installment agreement may reduce the late-payment rate for an eligible timely filed individual return, but it does not simply erase the underlying tax. [1][2]
If your monthly arrangement no longer fits your circumstances, see how to change an IRS payment plan. Keep the return-filing task and payment-plan task on separate checklists.
Interest and penalty relief are different questions
IRS interest rules are separate from penalty rules. Reducing tax or penalties can reduce related interest, but reasonable cause or first-time penalty relief does not itself remove interest on the remaining unpaid tax. [3]
For reasonable-cause relief, explain the circumstances and provide supporting records. The IRS considers the facts and the specific penalty. Some relief can be requested by telephone; other situations require a written request. Approval is not automatic. [4]
How to review a penalty notice
- Confirm the tax year, penalty name, and assessed amount.
- Compare the recorded filing and payment dates with your evidence.
- Check extensions, disaster relief, or other applicable rules.
- Separate any amount you dispute from any amount you agree is due.
- Follow the response instructions and preserve the deadline.
Use IRS transcripts and filing records to organize the dates. If the matter needs representation, our tax professional credentials guide explains who may handle collection or appeals work.
Primary sources
- IRS: Failure-to-file penalty
- IRS: Failure-to-pay penalty
- IRS: Interest
- IRS: Penalty relief for reasonable cause
Sources checked: October 31, 2026.