Penalty for Not Filing Taxes: The Failure to File Penalty

failure to file penalty

Of the approximately 140 different penalties that the IRS has to choose from, the failure-to-file penalty is one the harshest and most common. The IRS failure-to-file penalty charges a monthly penalty of 10 times more than the failure-to-pay-penalty and is intended to discourage those who owe taxes from hiding from the IRS and encourage them to come forward, file their taxes and work with the IRS to pay back the taxes they owe, even if they're unable to pay in full.

How the Failure-to-File Penalty is Calculated

The failure-to-file penalty begins calculating the day after the tax return filing due date. The typical due date for filling a tax return is April 15th if an extension has not been made. If an extension has been filed for and accepted before the April 15th due date, then the adjusted due date is October 15th. If you have requested an extension to file and did not pay at least 90% of the taxes you owe by April 15th, you will be charged the failure-to-pay penalty for the time period between April 15th and October 15th in which you still have not paid. If your balance remains unpaid and unfiled after the October 15th deadline, the failure-to-file penalty will kick in.

  • Failure-to-File Penalty, Due Date April 15th: A 5% penalty will begin to accrue on April 16th. The penalty is calculated based on the original amount of taxes owed; additional penalties and interest are not taken into account. The maximum penalty for failing to file by the due date is 25%, which is reached within 5 months, or September 16th of the same year after the due date. If the taxes are not filed within 60 days of the due date then the minimum penalty will be the lesser of $135 or 100% of the unpaid tax amount.

  • Failure-to-File Penalty, Due Date October 15th: A 5% penalty will begin to accrue on October 16th. The penalty is calculated based on the original amount of taxes owed. The maximum that the failure to file penalty can be is 25% of the original tax amount owed. It is important to note that if you do not pay 90% of your taxes by April 15th, you will be charged a failure-to-pay penalty of .5% for any dates that your taxes remain unpaid between April 16th and October 15th, and when the failure-to-file penalty kicks in on October 16th, you will pay the combined penalty, which is 4.5% for the failure-to-file penalty and .5% for the failure to pay penalty. If you still have not paid your tax bill by the time this combined penalty maxes out at 25%, you will continue to be charged the failure-to-pay penalty of .5%.

  • Failure-to-File Penalty Due to Fraud: If you have failed to file with the intent to commit fraud then the IRS will significantly increase the failure-to-file penalty – from 5% per month to 15% per month, and can reach a maximum of 75% of the original taxes owed instead of the normal 25%. This is a rare penalty, but the IRS will use it if an obvious attempt at tax fraud is proven.

Reducing or Removing the Failure-to-File Penalty

The IRS has the power to reduce or eliminate the penalties charged against you – a process known as tax penalty abatement – as long as you submit the proper request. In fact, approximately 33% of all penalties that the IRS charges are later removed. It is not difficult to have penalties removed as long as you have "reasonable cause," which in this case means that you have a valid excuse for not filing your taxes on time. The IRS accepts a broad range of excuses and evaluates each one on a case-by-case basis.

There are a number of ways to file for penalty abatement and if you have been charged a significant amount of money in penalties, it is worth your while to look into whether or not you qualify. The IRS understands that certain circumstances arise to keep taxpayers from complying with the tax filing and payment deadlines. Penalties are automatically charged to anyone who is non-compliant but can be removed fairly easily with reasonable cause.

Tax Penalty Help & Related Topics


Penalty Abatement Guide
If you were hit with the failure to file penalty there is a possibility that you can get this penalty removed if you have "reasonable cause" for not filing and not paying on time.

Sample IRS Penalty Abatement Letter
In order to abate tax penalties you must include a letter to the IRS to support your reason. Here is an example of what can be included in your letter.

Penalty for Filing Taxes Late
You will not always be hit with the failure-to-file penalty if you file taxes late. Depending on your situation, you may not actually be hit with any penalty. Know what type of penalty will hit you depending on your unique situaiton.

Penalties for Paying Taxes Late
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IRS Underpayment Penalty and Interest Rates
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IRS Tax Penalties and Interest
General information about IRS penalties, what the common IRS penalties are and what can be done to reduce the penalties that you’ve been charged with.

Penalties for Tax Evasion
Tax evasion can lead to fines up to 500K with imprisonment up to 5 years. Learn what tax evasion is and the various penalties that can be associated with it.

Payment Plans to Stop Tax Penalties
You can significantly reduce the amount of penalties being charged to your account by simply entering into a payment plan with the IRS. Here is a guide on picking the best payment plan for your situation.