IRS penalty calculator

The three meters running on an unpaid IRS balance

Failure-to-pay penalty, 0.5% per month.The slow, patient one: half a percent of the unpaid tax for each month (or part of a month), capping at 25% of the balance. It drops to 0.25% per month while an approved installment agreement is active, meaning a payment plan doesn't just stop the collection letters, it literally cuts the penalty rate in half.

Failure-to-file penalty, 5% per month.The brutal one: ten times the pay penalty, capping at 25% in just five months, with a minimum flat penalty once you're more than 60 days late. This asymmetry is the single most useful thing to know about IRS penalties: always file on time, even when you can't pay a cent.Filing stops the 5% meter; only the gentle 0.5% one keeps running. If you've received a CP59 for an unfiled return, this is why acting fast matters so much.

Interest, set quarterly, compounding daily. Interest accrues on the unpaid taxandon the penalties, at the federal short-term rate plus 3 points, recalculated every quarter. Unlike penalties, interest can't be waived on its own, but here's the leverage: when a penalty is removed through abatement, the interest charged on that penalty disappears with it. Between first-time abatement (clean three-year history) and reasonable-cause relief, penalty removal is one of the most underused options in the entire IRS playbook, and asking costs nothing.