# Failure to pay penalty: the IRS charge for tax paid late

Source: https://backtaxesdesk.com/penalties-interest/failure-to-pay-penalty
Publisher: Back Taxes Desk (backtaxesdesk.com), independent editorial site
Topic: Penalties and Interest
Last updated: 2026-09-18

> The IRS failure to pay penalty is 0.5% of your unpaid tax for each month or part of a month after the due date, up to 25%. It falls to 0.25% a month if you filed on time and have an approved payment plan, and rises to 1% a month if the tax is still unpaid 10 days after a notice of intent to levy.

## Key facts

- Standard rate: 0.5% of unpaid tax per month or part of a month
- Cap: 25% of the unpaid tax
- On an approved plan, filed on time: 0.25% per month
- 10 days after a notice of intent to levy: 1% per month
- Tax year 2026 payment due date: April 15, 2027, even with a filing extension

## What is the IRS failure to pay penalty?

The failure to pay penalty is a monthly charge on tax that is still unpaid after the payment due date. It is 0.5% of the unpaid amount for each month or part of a month, and it cannot exceed 25% of the tax. For tax year 2026 returns, it starts counting after April 15, 2027.

It applies even when your return was filed on time. A filing extension does not help here: the extension to October 15, 2027 covers filing only, so any tax not paid by April 15 draws this penalty. The IRS also charges the full month's amount if you pay partway through a month.

### How the 0.5% rate adds up

At 0.5%, an unpaid $8,000 balance adds $40 in penalty for each month it stays unpaid. After a year that is $480. Since the charge is a percentage of what is still owed, each payment you make lowers the next month's penalty, which is why paying something now is better than waiting to pay all of it.

## Is the late payment penalty lower on a payment plan?

Yes. If you are an individual, filed your return on time and have an approved payment plan, the IRS late payment penalty drops to 0.25% a month for as long as the plan is in place. On $8,000, that halves the monthly charge from $40 to $20, and it keeps shrinking as the balance falls.

Both conditions matter. A late-filed return keeps the 0.5% rate even on a plan, and a plan request that has not been approved does not lower it yet. Interest also continues on any plan until the balance is paid in full. Our [IRS payment plan guide](https://backtaxesdesk.com/payment-plans) explains how to qualify and what setup fees apply, from $0 for a short-term plan to $178 for a long-term plan set up by phone, mail or in person without direct debit.

> **Timing the plan:** Applying before the balance hits later collection notices keeps you on the lower rate and away from the 1% rate described below.

## When does the failure to pay penalty go up to 1%?

The rate doubles to 1% a month if you do not pay within 10 days after the IRS sends a notice of its intent to levy. For individuals, that notice is usually CP504, sent under Internal Revenue Code section 6331(d), and it can be followed by the final notice, LT11 or Letter 1058. The higher rate then applies to the remaining balance each month.

On $8,000 the 1% rate means $80 a month, and the 25% cap of $2,000 is reached in 25 months instead of 50. If you have a levy notice, read our page on the [final notice of intent to levy](https://backtaxesdesk.com/irs-notices/irs-final-notice-intent-levy) for your hearing rights and deadlines.

## Failure to pay penalty interest: is interest charged on the penalty?

Yes. The IRS charges interest on penalties as well as on the unpaid tax, at the underpayment rate: the federal short-term rate plus 3 percentage points, compounded daily. That rate is 7% a year for July to December 2026. The January to March 2027 rate is not yet announced; the IRS usually releases it in late November.

If the penalty is later removed, the interest charged on that penalty is removed automatically. Interest on the tax itself stays. Payments are applied to tax first, then penalties, then interest, so paying down the tax quickly stops both the penalty and most of the interest from growing.

## Which is worse, filing late or paying late?

Filing late is worse. The [failure to file penalty](https://backtaxesdesk.com/penalties-interest/failure-to-file-penalty) is 5% a month against 0.5% for the failure to pay penalty, so one month of late filing costs as much as ten months of late payment. If you must choose, file on time or get an extension and pay what you can.

When both penalties run in the same month, the late filing part is reduced by the late payment part, so the total is 5% a month for the first five months. On $6,000 unpaid, filing and paying three months late costs $810 in late filing and $90 in late payment, $900 total. Filing on time and paying three months late would cost only the $90.

## How to stop or reduce the late payment penalty

1. Pay as much as you can by April 15, 2027, using IRS Direct Pay or another IRS payment method. Every dollar paid is a dollar the 0.5% no longer applies to.
2. File on time or extend with Form 4868, so you keep the option of the 0.25% rate later.
3. Set up a payment plan for the rest before collection notices escalate.
4. Check whether the Automatic Exemption from Penalty applies. For eligible returns with a clean three-year history, the failure to pay penalty does not accrue and is not assessed.
5. If you did not qualify for automatic relief, ask for First Time Abate or reasonable cause relief.

The late payment penalty is separate from the [estimated tax penalty](https://backtaxesdesk.com/penalties-interest/estimated-tax-penalty), which covers too little tax paid during the year rather than tax paid after the April deadline. You can owe both on the same return. For every penalty and relief option in one place, start with the [IRS penalties guide](https://backtaxesdesk.com/penalties-interest).

## Common questions

### How much is the IRS late payment penalty per month?

It is 0.5% of the unpaid tax per month or part of a month. It becomes 0.25% on an approved payment plan if you filed on time, and 1% if you do not pay within 10 days of a notice of intent to levy.

### What is the maximum failure to pay penalty?

The penalty stops at 25% of the unpaid tax. At 0.5% a month, that takes 50 months to reach.

### Does a tax extension stop the failure to pay penalty?

No. An extension only moves the filing deadline to October 15, 2027. Tax not paid by April 15, 2027 still draws the late payment penalty and interest.

### Do I pay the late payment penalty if I pay a few days late?

Yes. The IRS charges a full month for any part of a month, so paying on April 20 still adds 0.5% of the unpaid amount.

### Can the failure to pay penalty be waived?

Yes, if you qualify. Eligible returns with a clean history get the Automatic Exemption from Penalty, and others can request First Time Abate or show reasonable cause, such as a serious illness or disaster.

### When does the failure to pay penalty start for 2026 taxes?

It starts the day after April 15, 2027, the payment due date for tax year 2026. The first month's 0.5% is charged on whatever is still unpaid at that point.

## Sources

- [Failure to Pay Penalty](https://www.irs.gov/payments/failure-to-pay-penalty)
- [Failure to File Penalty](https://www.irs.gov/payments/failure-to-file-penalty)
- [Payment plans; installment agreements](https://www.irs.gov/payments/payment-plans-installment-agreements)
- [Quarterly interest rates](https://www.irs.gov/payments/quarterly-interest-rates)
- [Administrative penalty relief](https://www.irs.gov/payments/administrative-penalty-relief)