If you owe the IRS and can't pay, it's tempting to put off filing too. Don't. The penalty for filing late is ten times steeper than the penalty for paying late — so filing on time, even without a payment, is one of the easiest ways to save money.
Here's a quick, plain-English look at how these two penalties work.
Filing late: the costly one
Miss your filing deadline (including any extension) and the IRS charges 5% of your unpaid tax for every month you're late. Even one day late counts as a full month. It adds up fast: the penalty hits its 25% maximum in just five months.
Wait more than 60 days and a minimum penalty kicks in — $525, or the full amount you owe if that's less. The good news? If you're getting a refund, there's generally no penalty for filing late.
Paying late: smaller, but it keeps going
If you file on time but can't pay in full, the late-payment penalty is just 0.5% a month. The catch is that it keeps adding up until your balance is paid, up to 25%.
A few things can change that rate. An IRS payment plan can cut it in half, while leaving a final IRS notice unpaid can double it. And remember: an extension gives you more time to file, not more time to pay.
What it looks like in real life
Say you owe $10,000 and you're three months late:
Filed on time, paid late: $150 in penalties
Didn't file or pay: $1,500 in penalties
Just filing on time saves $1,350 — and the gap grows from there.
On top of penalties, the IRS also charges interest — currently 7% a year, compounded daily — until everything is paid off.
Penalties at a glance
Here's how the penalties stack up for each type of taxpayer:
Individuals and sole proprietors: Filing late costs 5% of unpaid tax per month, up to 25%. Paying late costs 0.5% per month, up to 25%.
C corporations: Same as individuals — 5% per month for filing late and 0.5% per month for paying late, each up to 25%.
Partnerships: Filing late costs $255 per partner per month, for up to 12 months — even if no tax is owed. Paying late costs 0.5% per month on any tax the business owes.
S corporations: Filing late costs $255 per shareholder per month, for up to 12 months — even if no tax is owed. Paying late costs 0.5% per month on any tax the business owes.
Facing IRS penalties? Let's talk about your options
Penalties aren't always the end of the story. Depending on your history and situation, there may be ways to reduce or even remove them — and smart ways to limit what you owe going forward. The right move depends on the details.
That's where Bottala Tax and Advisory comes in. We'll look at your situation, explain your options in plain English, and help you take the next step with confidence.
Email us to schedule a consultation: info@bottalacpa.com