The April 15 filing deadline is now more than ten weeks behind us. If you owe tax for 2025 and still have not filed a return, two separate IRS penalties have been quietly building on your balance every month, and a third charge, interest, has been compounding daily underneath them.
The good news is that the math is knowable, the worst of it can be stopped this week, and in many cases part of the damage can be erased. Here is exactly how the penalties stack up, which one to attack first, and what relief the IRS itself offers to people who are late for the first time.
Two penalties, and one is ten times bigger
The IRS charges separately for filing late and for paying late, and the difference in size matters. The failure-to-file penalty runs 5 percent of the unpaid tax for each month, or part of a month, that the return is late, up to a maximum of 25 percent of the tax owed.
The failure-to-pay penalty is far smaller: 0.5 percent of the unpaid tax per month or partial month, also capped at 25 percent over time.
That tenfold gap is the single most useful fact for anyone who is behind. Filing the return, even with no payment attached, shuts off the big penalty. People sometimes sit on a finished return because they cannot pay the balance, and that instinct is exactly backwards. File now, then work out the payment.
The 60-day minimum penalty has already kicked in
There is a floor that applies once a return is more than 60 days late. For 2025 returns that were due in 2026, the minimum failure-to-file penalty is the lesser of $525 or 100 percent of the tax owed, according to the IRS penalty rules. The 60-day mark for April 15 filers passed in mid-June, so that minimum now applies even to relatively small balances.
In practice, someone who owes $400 and files this summer owes the full $400 again as a penalty, since 100 percent of the tax is the smaller number. Someone who owes $5,000 faces the regular percentage math instead, because 5 percent per month grows past $525 quickly.
How the two penalties combine each month
In any month where both penalties apply, the IRS does not simply add 5 percent and 0.5 percent. The failure-to-file penalty is reduced by the failure-to-pay amount, so the combined charge is 5 percent per month: 4.5 percent for not filing plus 0.5 percent for not paying.
Run that against a $3,000 balance. By late June, a person who neither filed nor paid is roughly three months late (April, May, and June each count, and a partial month counts as a whole one). That is about 13.5 percent in failure-to-file penalty and 1.5 percent in failure-to-pay penalty, or roughly $450, before a dime of interest. Left alone until the fall, the failure-to-file portion keeps climbing toward its 22.5 percent combined-era cap, and the failure-to-pay penalty keeps running even after that, until it hits its own 25 percent ceiling or the balance is paid.
Interest runs on top, and it is about to go up
Penalties are not the whole bill. The IRS also charges interest on unpaid tax from the original due date, compounded daily, at a rate it resets every three months. For individuals, the underpayment rate is 6 percent for the current quarter, and the agency has announced it rises to 7 percent on July 1. Interest also accrues on the penalties themselves, which is how a modest tax debt can grow noticeably in a single year.
There is no way to appeal interest as such; it is set by law. The only lever is shrinking the balance it runs against, which again points to filing and paying whatever you can, as soon as you can.
If you are owed a refund, relax, but not forever
Both late penalties are calculated as a percentage of unpaid tax. If the IRS owes you money, there is no failure-to-file penalty at all, and no interest charge. Plenty of late filers are in this camp, especially workers whose withholding covered their bill.
The deadline that matters for them is longer but real: a refund must generally be claimed within three years of the return’s due date, or the Treasury keeps it. Filing a late refund-due return costs nothing but the effort.
Ways to shrink what you owe
First, if you are on an approved IRS installment agreement, the failure-to-pay rate drops by half, to 0.25 percent per month, while the agreement is in effect. Most individuals who owe $50,000 or less can set up a payment plan online in minutes, without talking to anyone.
Second, ask about penalty relief. The IRS grants first-time abatement to taxpayers with a clean compliance history over the prior three years, and it considers reasonable-cause relief for people sidelined by serious illness, disasters, and similar events. Abatement can wipe out the filing and payment penalties entirely, though not the interest on the tax itself.
Third, do not wait for a notice to make a partial payment. Every dollar paid now stops accruing penalties and interest immediately, and payments are applied to tax first, which is what the percentage penalties are computed against.
The sequence, then, is simple: file the return this week even if you cannot pay, put whatever you can on the balance, set up a payment plan for the rest, and then ask for first-time abatement once the return has posted. Late is expensive, but later is always more expensive, and every piece of the penalty math rewards acting before the next month ticks over on July 15.
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