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Penalty & Interest Calculator
By Priya Raman, Contributing Writer, Policy & RegulationEstimate IRS failure-to-file and failure-to-pay penalties plus interest on an unpaid tax balance.
By Priya Raman, Contributing Writer, Policy & RegulationEstimate IRS failure-to-file and failure-to-pay penalties plus interest on an unpaid tax balance.
Educational estimate using simplified, capped versions of the IRS penalty and interest rules.
Three separate charges feed into the total above, and each one is capped and reset on its own schedule by the IRS.
| Charge | Rate used here | Cap | Source |
|---|---|---|---|
| Failure-to-pay penalty | 0.5% per month | 25% of unpaid tax | IRS.gov |
| Failure-to-file penalty | 5% per month (reduced to 4.5% when combined with failure-to-pay in the same month) | 25% of unpaid tax | IRS.gov |
| Interest on the unpaid balance | Approximately 8% per year in this tool's simplified model | Resets quarterly, compounds daily | IRS.gov |
The actual Q3 2026 underpayment rate published by the IRS is 7% for individuals; this calculator's 8% assumption gives a slightly conservative (higher) estimate. See the full 2026 rates reference for the exact current figure.
Take a $10,000 balance, six months late, where the return was filed on time but the tax was not paid. The failure-to-pay penalty runs 0.5% a month for six months, or $300. Interest at roughly 8% a year for half a year adds about $400. Total: $700 on top of the original $10,000. Now change one fact: the return itself was never filed. The failure-to-file penalty kicks in at a reduced 4.5% a month (since both penalties apply in the same months), adding $2,250 instead of nothing. The same $10,000 balance now carries $2,950 in penalties and interest instead of $700, more than four times as much, for the identical six months late. That gap is the entire argument for filing on time even when you cannot pay.
We apply the failure-to-pay penalty (0.5% a month), the failure-to-file penalty (5% a month, reduced when both apply in the same month), and interest (about 8% a year in this simplified model), each capped at 25% of the unpaid tax per IRS rules. Real IRS penalty calculations account for partial months, changing quarterly interest rates, and payments applied along the way, so treat this total as a close estimate rather than the exact number on a notice.
Failure-to-file, by a wide margin. It runs at roughly 5% of the unpaid tax per month against 0.5% for failure-to-pay, so skipping the return entirely costs far more than filing it and owing money.
They can overlap, but the IRS reduces the failure-to-file rate in months where both apply so you are not charged the full amount twice on the same unpaid tax.
Often, yes. First-time penalty abatement can wipe out these charges for a taxpayer with a clean three-year compliance history, and reasonable-cause relief covers situations like serious illness or disaster.
Not exactly. This tool simplifies partial months, quarterly interest changes, and payments applied along the way, so treat it as a close estimate rather than the figure on a real notice.