How the failure-to-pay penalty works

The failure-to-pay penalty under IRC §6651(a)(2) applies when you file on time but do not pay the full balance by the deadline. It is 0.5% of the unpaid tax per month (or part of a month), capped at 25%. It is much smaller than the failure-to-file penalty — but it runs alongside interest, which keeps compounding until the balance is gone.

IRS Code Section
IRC §6651(a)(2)
Penalty Rate
0.5% of unpaid tax per month (or part of a month)
Maximum
25% of the unpaid tax
On an Installment Agreement
Rate drops to 0.25% per month
After IRS Levy Notice
Rate rises to 1% per month
Common Relief
First-time abatement · Reasonable cause (Form 843)
— Penalty vs. interest —

Two different charges accrue on an unpaid balance: the failure-to-pay penalty (0.5%/month, capped at 25%) and statutory interest (uncapped, compounded daily). The penalty can be abated; interest on the tax generally cannot — but interest charged on an abated penalty is refunded when the penalty is removed.

Getting the penalty removed

Like the late-filing penalty, the failure-to-pay penalty is regularly abated through first-time abatement or reasonable cause. If you have already paid it, Form 843 claims it back. Estimate the penalty here, then start a free, contingency-based review.