Failure to File

The failure to file penalty, also known as the  delinquency penalty, runs at the more severe rate of 5% per month (or partial month) of lateness to a maximum of 25%. If you obtain an extension for your filing due date, you are not filing late unless you miss the extended due date. However, a filing extension does not apply to your responsibility for payment.

If the 1/2% failure to pay penalty and the failure to file penalty both apply, the failure to file penalty drops to 4.5% per month (or part) so the total combined penalty remains at 5%. The maximum combined penalty for the first five months is 25%. Thereafter the failure to pay penalty can continue at 1/2% per month for 45 more months (an additional 22.5%). Thus, the combined  penalties can reach a total of 47.5% over time. But this does not include interest which compounds daily, and continues for ever.

The failure to file penalty is also more severe in that it is based on the amount required to be shown on the return, and not just the amount shown as due. (Credit is given for amounts paid, for example, via withholding or estimated payments. So if no amount is owed, there is no penalty for late filing.) Thus, for example, if a return is filed three months late showing $5,000 owed (after payment credits), the combined  penalties would be 15%, which equals $750. If the actual tax liability is later determined to be an additional $1,000, the failure to file penalty (4.5% × 3 = 13.5%) would also apply to this amount for an additional $135 in penalties.

A minimum failure to file penalty will also apply if you file your return more than 60 days late. In this case, the failure to file penalty is at least $100. Even here, however, if you owe no taxes, there is no penalty.