Quick summary

Failure-to-file and failure-to-pay penalties are two distinct IRS sanctions that commonly affect taxpayers who miss filing deadlines or fail to pay taxes due. They are calculated differently, can run at the same time, and—unless relieved by abatement or other relief—can substantially raise the total amount owed. In my practice I’ve seen taxpayers reduce total costs simply by filing on time and then arranging payment, because filing cuts the larger failure-to-file penalty even when payment remains outstanding.

How the two penalties are assessed and why that matters

  • Failure-to-file (FTF): Usually assessed as a percentage of the unpaid tax for each month or part of a month a return is late. This penalty is intended to encourage timely filing and is generally larger than the failure-to-pay penalty.
  • Failure-to-pay (FTP): Assessed as a smaller monthly percentage of the unpaid tax when you don’t pay the balance due by the return’s due date. It’s intended to encourage timely payment.

Both penalties are applied to the unpaid tax and can accrue at the same time. Because they are separate penalties, being late to file and late to pay increases your monthly cost more quickly than being late to pay only.

(For official IRS guidance on penalties, see IRS penalty resources.)

A simple, realistic example

Suppose you owe $2,000 in federal income tax and you file your return three months late and also don’t pay until after you file. Using the common monthly rates for each penalty:

  • Failure-to-file: 5% per month × 3 months = 15% of $2,000 = $300
  • Failure-to-pay: 0.5% per month × 3 months = 1.5% of $2,000 = $30

Total added penalties over three months = $330. Interest on the unpaid tax and on the penalties will also accrue until paid. This example shows why filing on time—even if you can’t pay in full—reduces the larger penalty and limits total cost.

Key interaction rules (practical view)

  1. They are separate charges. The IRS computes each based on the unpaid tax and applies both when applicable.
  2. Filing the return stops further failure-to-file penalties from accruing, but it does not stop failure-to-pay penalties. So filing promptly is the fastest way to stop the larger penalty.
  3. Interest applies to unpaid tax and generally accrues on penalties as well until they are paid. Interest rates change quarterly and are posted by the IRS.
  4. The IRS offers special rules and exceptions—such as penalty abatements, first-time relief, and disaster-related relief—that can reduce or eliminate penalties when reasonable cause or administrative relief exists.

Payment alternatives that reduce penalty exposure

  • File on time and pay what you can: Filing prevents further failure-to-file penalty accrual. Even a partial payment lowers the base on which penalties and interest are calculated.
  • Installment agreement: The IRS allows monthly payment plans for many taxpayers. Entering an approved installment agreement reduces collection pressure and can make penalties and interest more manageable.
  • Offer in Compromise and other hardship programs: For taxpayers who cannot pay, these programs may be options—but eligibility is narrow and requires documentation.

In my work advising clients, the most effective early move is almost always: file the return promptly, then negotiate a payment plan. This simple sequence stops the bigger monthly penalty and gives time to pursue relief options.

Penalty abatement and relief — where to look first

  • First-Time Penalty Abatement (FTA): The IRS may grant administrative relief for a taxpayer’s first assessed penalty if certain conditions are met (for example, historically compliant filings). The FTA can remove penalties but typically requires that the taxpayer file returns and pay or arrange to pay the tax due.
  • Reasonable cause: If circumstances beyond your control prevented timely filing or payment (serious illness, natural disaster, death in the family, etc.), you may qualify for abatement by demonstrating reasonable cause with supporting documentation.
  • Disaster or official relief: The IRS sometimes provides automatic penalty relief when a federally declared disaster or similar event disrupts normal tax-filing or payment processes.

For practical guidance and templates on requesting abatement, see our guide on how to request penalty abatement (internal resource). Useful related posts: how to request penalty abatement from the IRS (https://finhelp.io/glossary/how-to-request-penalty-abatement-from-the-irs/) and penalty abatement for first-time failure-to-file or pay: process and tips (https://finhelp.io/glossary/penalty-abatement-for-first-time-failure-to-file-or-pay-process-and-tips/).

Common misunderstandings to avoid

  • “Filing an extension protects me from penalties.” A filing extension extends only the time to file; it does not extend the time to pay. If you don’t pay by the original due date, failure-to-pay penalties and interest can still apply.
  • “If I can’t pay, I won’t be penalized.” The IRS still assesses failure-to-pay penalties unless you have an approved relief or reasonable cause.
  • “Penalties vanish if I ask.” Abatement is possible but not automatic. You must meet eligibility requirements or demonstrate reasonable cause with documentation.

Practical steps to reduce risk and cost (checklist)

  1. File your return by the due date or file an extension to avoid failure-to-file penalties. (Remember: an extension does not extend the payment date.)
  2. If you can’t pay in full, pay as much as you can when you file to lower penalties and interest.
  3. Request an installment agreement promptly if you need time to pay. These are often easier to get if you proactively ask rather than wait for IRS notices.
  4. If you believe you have reasonable cause or qualify for first-time relief, prepare a clear request with supporting documentation; link to and review guidance on penalty abatement before submitting. Helpful internal resources include our step-by-step explanations for requesting abatement and building a reasonable-cause case (see internal links above).
  5. Keep records: maintain copies of filings, payment confirmations, and any correspondence with the IRS.

Real-world scenarios I’ve seen

  • Small business owner: Filed late because an employee handled payroll and left mid-year. Filing promptly and entering an installment agreement reduced overall penalties; a later reasonable-cause claim succeeded because the business documented the disruption.
  • Freelancer: Missed a quarterly estimated tax payment and later missed filing. By filing immediately and setting up an automatic payment plan, the freelancer minimized further penalties and later qualified for first-time penalty relief.

Frequently asked questions (short answers)

  • Can the IRS charge both penalties at the same time? Yes. They are separate penalties and commonly apply at the same time when a return is late and tax is unpaid.
  • Will interest be charged on penalties? Yes. Interest generally accrues on unpaid tax and any penalties until paid.
  • Can penalties be removed? Sometimes—through first-time penalty abatement, reasonable cause, or disaster relief. Each path has eligibility requirements and documentation standards.

Resources and authoritative references

Final notes and disclaimer

This article explains how failure-to-file and failure-to-pay penalties interact and outlines common relief options. It’s educational and does not substitute for personalized tax advice. For decisions affecting your tax situation, consult a qualified tax professional or the IRS directly. My recommendations are based on years of client experience and publicly available IRS guidance as of 2025.