Failure-to-Pay Penalty

Failure-to-Pay Penalty

The Failure-to-Pay Penalty is a tax penalty imposed by the Internal Revenue Service (IRS) on taxpayers who do not pay the full amount of tax owed by the due date. This penalty is typically assessed as a percentage of the unpaid tax amount and accrues monthly until the tax is paid in full.

The penalty is generally 0.5% of the unpaid taxes for each month or part of a month that the tax remains unpaid, up to a maximum of 25% of the unpaid taxes. If the taxpayer has filed an extension but did not pay the taxes owed, the penalty may still apply.

For example, if a taxpayer owes $1,000 in taxes and fails to pay by the due date, they would incur a $5 penalty for the first month the payment is late, and this amount would increase each subsequent month until the tax is paid or reaches the maximum limit.