The failure-to-file penalty is imposed under IRC §6651(a)(1) when a taxpayer files a required tax return after its due date — including any extension that was properly filed. The penalty is 5% of the unpaid tax for each month or part of a month the return is late, up to a maximum of 25%.

How it is calculated

The base is unpaid tax as of the original return due date — not gross tax liability. If a taxpayer paid the full tax by the due date but filed the return late, the FTF penalty is generally zero. The penalty accrues for each month or partial month the return is delinquent, capping at five months (25%).

For returns more than 60 days late, a minimum penalty applies even when the regular calculation produces a smaller amount. For 2026, the minimum is the lesser of $485 or 100% of unpaid tax.

— Combined with Failure-to-Pay —

When both the FTF and the failure-to-pay (FTP) penalties apply for the same month, the FTF penalty is reduced by the FTP amount, leaving 4.5% per month FTF + 0.5% FTP = 5% combined. This continues until the FTF cap is reached, after which only FTP continues to accrue.

When the penalty applies

  • Income tax returns (Forms 1040, 1120, 1120-S, 1065, 1041) filed after the due date
  • Employment tax returns (Form 941) filed after the quarterly due date — see 941 penalty
  • Excise and certain information returns subject to §6651
  • Returns filed under an extension that itself was untimely

How to abate the penalty

The FTF penalty is one of the most commonly abated. Three grounds apply:

  1. First-Time Penalty Abatement (FTA). If the taxpayer was compliant for the three prior tax years (no unfiled returns, no penalties), the IRS will administratively abate the FTF penalty on request. No substantiation required beyond the compliance history. See the FTA page.
  2. Reasonable Cause. The taxpayer establishes that ordinary business care and prudence was exercised, but a circumstance beyond their control prevented timely filing. Requires written substantiation. See reasonable cause.
  3. Statutory Exception (Kwong). Recent Court of Federal Claims ruling held the IRS failed to apply the COVID-era postponement under IRC §7508A(d). Returns due between January 20, 2020 and July 10, 2023 may have been assessed FTF penalties against the wrong deadline. See COVID refund.
IRS Code Section
IRC §6651(a)(1)
Penalty Rate
5% per month on unpaid tax
Maximum
25% of unpaid tax (5 months)
Minimum (60+ days late)
Lesser of $485 or 100% of unpaid tax (2026)
Triggered By
Return filed after the due date (including extensions)
Abatement Grounds
FTA · Reasonable Cause · Statutory Exception

How refunds work

If the taxpayer has already paid the FTF penalty, abatement does not simply remove a balance — it triggers a refund of the paid amount plus the interest that was charged on it. The refund is issued via the same Form 843 process used for the abatement request, and is paid by check or direct deposit within 60–120 days of approval.