When you do and don’t owe penalties
The rules differ depending on whether you owe the IRS or the IRS owes you.
| Situation | What generally happens |
|---|---|
| You’re due a refund | No failure-to-file penalty if there’s no unpaid tax, but you could lose your refund if you wait too long to file |
| You owe tax | Failure-to-file and failure-to-pay penalties may apply, along with interest |
Source: Internal Revenue Service
For an unfiled return, refunds from withholding or estimated tax payments must be claimed within three years of the return’s due date.
Late-filing and late-payment penalties
The IRS calculates the two penalties differently:
| Penalty | Rate | Maximum |
|---|---|---|
| Failure-to-file | 5% of unpaid tax per month or partial month | 25% of unpaid tax |
| Failure-to-pay | 0.5% of unpaid tax per month or partial month | 25% of unpaid tax |
For a 2025 Form 1040 return due in 2026, if the return is more than 60 days late, the minimum failure-to-file penalty is $525 or 100% of the unpaid tax, whichever is less.
Steps to take after missing the deadline
If the filing deadline has already passed:
- File your return as soon as possible. This stops the failure-to-file penalty from continuing to grow.
- Pay as much as you can. A smaller unpaid balance typically means less failure-to-pay penalty and interest.
- Consider an IRS payment plan if you can’t pay in full. For individuals who filed on time, the failure-to-pay rate usually drops to 0.25% per month while an approved installment agreement is in effect.
- Respond to IRS notices. Follow any instructions or deadlines included in a letter you receive.
Penalty relief may be available
Some taxpayers may qualify for IRS penalty relief. Beginning with eligible 2025 tax-year returns, the IRS is transitioning to an Automatic Exemption from Penalty (AEP) for taxpayers with a qualifying three-year history of timely compliance. AEP is generally automatic, but during the transition some qualifying taxpayers may still receive a penalty notice and may need to contact the IRS to request First Time Abate. AEP does not eliminate unpaid tax or interest.
If you don’t qualify for administrative relief, you may still be able to request reasonable-cause penalty relief if circumstances beyond your control prevented you from filing or paying on time.
If you know in advance that you can’t file by the regular deadline, requesting a tax filing extension can give you more time to file. It doesn’t give you additional time to pay any tax due.
