IRS Penalty And Interest Calculator
IRS Penalty and Interest Calculator
Estimate the failure-to-file penalty, failure-to-pay penalty, and interest the IRS may add to an unpaid balance. Estimate only. Nothing is stored.
Estimate only. The IRS calculates penalties and interest using exact daily rates and rules this tool simplifies. Interest is assumed at about 8% per year. Confirm your real figures with the IRS or a tax professional.
How IRS penalties stack up
When you owe the IRS and do not pay on time, two penalties can apply, plus interest. The failure-to-pay penalty is 0.5 percent of the unpaid tax for each month or part of a month it stays unpaid, up to a maximum of 25 percent. The failure-to-file penalty is much steeper at 5 percent per month, also capped at 25 percent, which is why filing on time matters even if you cannot pay.
The combined-month rule
In any month where both penalties apply, the failure-to-file penalty is reduced by the failure-to-pay penalty, so the file penalty effectively runs at 4.5 percent that month rather than 5. There is also a minimum failure-to-file penalty if your return is more than 60 days late. The calculator applies both rules to keep the estimate realistic.
Interest on top
The IRS also charges interest on unpaid tax, and on the penalties themselves, at a rate that changes quarterly. It has recently hovered around 8 percent a year, compounded daily. Because interest keeps running until the balance is paid, an old balance can grow substantially.
How penalties can be reduced
Penalties are not always permanent. First-time penalty abatement can remove them for taxpayers with a clean recent history, and reasonable-cause relief may apply if something outside your control caused the delay. Resolving the underlying balance through an installment agreement, an Offer in Compromise, or currently-not-collectible status can also stop new penalties from accruing.
How this calculator works
This tool estimates three charges the IRS adds to unpaid tax. The failure-to-file penalty is 5% of the unpaid tax per month, capped at 25%; the failure-to-pay penalty is 0.5% per month, also capped at 25%. In any month both apply, the file penalty is reduced by the pay penalty (so 4.5% that month), and a minimum failure-to-file penalty applies once a return is more than 60 days late. Interest, recently around 8% per year, accrues on the tax and penalties. Rates and the minimum penalty change over time, so the estimate is approximate.
Sources and references
These figures come from primary sources, which are updated as the rules change:
- IRS, penalties (failure to file and failure to pay)
- IRS, interest on underpayments
- 26 U.S.C. 6651, failure to file and pay
Frequently Asked Questions
How much is the IRS failure-to-file penalty?
The failure-to-file penalty is 5 percent of the unpaid tax for each month or part of a month your return is late, up to a maximum of 25 percent. If your return is more than 60 days late, a minimum penalty also applies. Filing on time, even without paying, avoids this larger penalty.
How much is the IRS failure-to-pay penalty?
The failure-to-pay penalty is 0.5 percent of the unpaid tax per month or part of a month, up to 25 percent. In months where both the file and pay penalties apply, the file penalty is reduced so the combined rate is 5 percent, not 5.5.
How much interest does the IRS charge?
The IRS interest rate changes every quarter and is the federal short-term rate plus 3 percent, compounded daily. It has recently been around 8 percent a year. Interest accrues on both the unpaid tax and the penalties until the balance is fully paid.
Can IRS penalties be removed?
Sometimes. First-time penalty abatement can remove penalties for taxpayers with a clean compliance history, and reasonable-cause relief may apply when circumstances beyond your control caused the delay. Interest is harder to remove but stops once the balance is paid.
How do I stop penalties from growing?
Penalties and interest keep accruing until the balance is resolved. Filing any missing returns, then setting up an installment agreement, an Offer in Compromise, or currently-not-collectible status, stops new failure-to-pay penalties and can put the debt on a path to resolution.
Can IRS penalties be waived?
Often, yes. First-time penalty abatement can remove failure-to-file and failure-to-pay penalties for taxpayers with a clean compliance history for the prior three years, and reasonable-cause relief may apply when circumstances beyond your control caused the delay.
What is first-time penalty abatement?
It is an IRS administrative waiver that removes one qualifying penalty for a single tax period when you have filed required returns and had no penalties in the prior three years. The IRS also removes the interest charged on the abated penalty.
Does the IRS ever remove interest?
Interest is rarely removed on its own, because it is set by law, but interest charged specifically on a penalty that gets abated is removed with the penalty. Resolving the balance is the main way to stop interest from growing.
Does CuraDebt calculate or settle IRS penalties, and is it a tax firm?
CuraDebt is a free service that reviews the information you submit and, where appropriate and permitted by law, matches you with independent, licensed providers for debt relief or tax resolution. CuraDebt is not a law firm and does not provide legal or tax advice. Results vary and are not guaranteed.
Related Resources
- All debt and tax calculators
- Offer in Compromise calculator
- Currently Not Collectible qualifier
- How penalty abatement works
- IRS installment agreement payment calculator
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