The Failure to File Penalty is one of the most common penalties imposed by the IRS on taxpayers who do not submit their tax return by the due date. This penalty can significantly increase the amount of tax owed, so it’s important to understand how it works and what steps you can take to avoid or mitigate it.
The Failure to File Penalty is calculated as 5% of the unpaid taxes for each month (or part of a month) that the return is late, up to a maximum of 25% of the unpaid tax. If the return is more than 60 days late, the minimum penalty is either $435 or 100% of the unpaid tax, whichever is less.
To avoid this penalty, taxpayers should file their tax return on or before the due date, even if they cannot pay the full amount owed. Filing on time will stop the Failure to File Penalty from accruing, and the taxpayer can then work with the IRS to resolve the balance through a payment plan or other options.