The IRS imposes penalties for an enormous range of taxpayer behavior — late filing, late payment, late deposit, underpayment of estimated tax, accuracy errors, information return failures, employment tax failures, and many more. Each penalty has its own statutory authority, its own calculation method, and its own conditions under which abatement may be granted.
For business owners, eleven penalty types account for the overwhelming majority of total assessments. This page indexes those eleven types, links to the dedicated treatment of each, and provides the consolidated relief strategy. Covered penalties may be prevented by AEP, requested under FTA on a transition period, or abated under reasonable cause, statutory exception, or a current administrative waiver.
The eleven penalty types that matter for businesses
The list below is organized by how frequently we see each penalty in our practice. Click into any penalty type for the full treatment — calculation, statutory basis, abatement eligibility, and case-specific filing strategy.
Failure-to-File Penalty
The penalty for filing a tax return after the due date — typically 5% per month, capped at 25% of unpaid tax.
Failure-to-Pay Penalty
The penalty for not paying the tax shown on a return by the due date — typically 0.5% per month.
Underpayment of Estimated Tax Penalty
The penalty for not paying enough estimated tax during the year — calculated on Form 2210 (individuals) or Form 2220 (corporations).
1099 Late-Filing Penalty
The penalty for failing to file information returns (1099-NEC, 1099-MISC, etc.) on time — varies by lateness, $60–$680 per form for 2026.
941 Late-Filing Penalty
The penalty for failing to file Form 941 (employer quarterly tax) or failing to deposit withheld payroll taxes on time.
Trust Fund Recovery Penalty
Personal liability for 100% of unpaid payroll trust-fund taxes — assessed against responsible persons who willfully failed to pay over withheld income and FICA taxes.
What every penalty type has in common
Regardless of which penalty type the IRS assessed, the path is the same: see whether AEP already prevented it, whether FTA can still be requested, or whether reasonable cause / Form 843 is required. When a claim is filed, the IRS typically processes it in 60–120 days.
For multi-penalty cases, a single Form 843 can address every assessed penalty across every affected tax year, provided each is substantiated separately within the same submission. Our practice handles multi-penalty, multi-year cases as a routine matter.