Tax Penalty & Interest Estimator
See what filing or paying late actually costs — failure-to-file, failure-to-pay, the combined-rule overlap, and daily-compounded IRS interest.
Written by Dorothy Ibrahim, 10+ years in banking & finance
Reviewed by Benton Jona, EA (Enrolled Agent) — 2026-07-13
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How we calculate this
This calculator estimates what filing or paying late actually costs: the failure-to-file penalty (5% of the unpaid tax per month, up to 25%), the failure-to-pay penalty (0.5% per month, up to 25%), the overlap rule that combines them, and IRS underpayment interest compounded daily at the quarterly rates. The single most important fact it demonstrates: not filing costs ten times more per month than not paying, so filing on time protects you even when you cannot pay a cent.
The formulas
- Failure-to-file (FTF)
- 5% × unpaid tax × months late filing (any part of a month counts as a full month), capped at 25%If the return is over 60 days late, a minimum applies: the lesser of $535 (2026 tax year; $510 for 2025) or 100% of the tax.
- Failure-to-pay (FTP)
- 0.5% × unpaid tax × months late paying, capped at 25%Drops to 0.25%/month while an approved IRS installment agreement is in effect.
- Overlap rule
- in months where both apply, FTF is reduced by FTP: 4.5% + 0.5% = 5% combined per month; the combined penalties cap at 47.5%
- Interest
- daily compounding on the unpaid tax at the IRS underpayment rate for each calendar quarter (7% in 2025 Q4–2026 Q1, 6% in 2026 Q2, 7% in 2026 Q3)Interest accrues on the unpaid TAX only and cannot be abated the way penalties sometimes can. The IRS also charges interest on the failure-to-file and failure-to-pay penalties themselves; this estimate does not model interest-on-penalty, so your actual bill can run slightly higher.
Worked example
- Take the defaults: $10,000 of 2026-year tax due April 15, 2027, with the return still unfiled and unpaid as of July 15, 2027 — three started months late.
- Both penalties run together, so FTF accrues at the reduced 4.5%/month: 3 × 4.5% × $10,000 = $1,350.
- FTP = 3 × 0.5% × $10,000 = $150. (The over-60-days minimum FTF of $535 is already exceeded, so it does not change anything.)
- Interest compounds daily on the $10,000 for 91 days at 7%/yr: about $176.04.
- Total owed as of July 15: $10,000 + $1,350 + $150 + $176.04 = $11,676.04 — and waiting one more month adds about $560.67 more.
Rates, benchmarks & sources
- Failure-to-file (5%/mo, max 25%), failure-to-pay (0.5%/mo, max 25%; 0.25%/mo on an installment agreement), and the combined-month overlap rule (4.5% + 0.5%) — IRC §6651 / IRS penalty guidance
- Minimum failure-to-file penalty when over 60 days late: $535 for the 2026 tax year (returns filed in 2027); $510 for 2025 — or 100% of the tax if less — Rev. Proc. 2025-32 §4.52
- IRS underpayment interest rate of 7% for 2025 Q4 and 2026 Q1 — Rev. Rul. 2025-22
- IRS underpayment interest rate of 6% for 2026 Q2 — Rev. Rul. 2026-5
- IRS underpayment interest rate of 7% for 2026 Q3 — Rev. Rul. 2026-10
Figures current as of 2026-07-02. See our methodology & editorial standards for how constants are versioned and verified.
What this tool doesn’t model
- Interest rates are published quarterly by the IRS; for dates beyond the latest quarter in our config (2026 Q3 at 7%), the tool carries that rate forward, so long-horizon estimates drift as new Revenue Rulings land.
- Federal only — states charge their own late-filing and late-payment penalties and interest on state returns, which are not modeled. This is an estimate, not filing advice or a substitute for an IRS transcript.
- It models one lump-sum tax owed with single filed/paid dates — partial payments along the way, amended returns, and the estimated-tax underpayment penalty (Form 2210, a separate penalty covered by the Quarterly Estimated Tax tool) are out of scope.
- Penalty relief is not modeled: first-time abatement and reasonable-cause relief can eliminate penalties (not interest), and the fraudulent-failure-to-file rate (15%/mo) is likewise out of scope.
- The IRS computes interest on penalties as well as tax in some circumstances; this tool compounds interest on the unpaid tax principal, so the true IRS figure can run slightly higher.
Frequently asked questions
I cannot pay my tax bill — should I still file the return?
The math says filing is overwhelmingly worth it. Not filing accrues 5% of the unpaid tax per month; filing but not paying accrues 0.5% — one-tenth as much. On the default $10,000 example, filing today cuts the monthly penalty bleed from $500 to $50 while you arrange payment. The IRS also generally requires filed returns before it will grant an installment agreement.
How does the combined penalty work when I have both?
In any month where both penalties apply, the failure-to-file penalty is reduced by the failure-to-pay amount: 4.5% + 0.5% = 5% combined per month, so you never pay 5.5%. FTF caps at 25% (reached after 5 months), FTP continues at 0.5% up to its own 25% cap, and the two together cannot exceed 47.5% of the tax. Interest is separate and keeps compounding daily on top.
What is the $535 minimum penalty I keep hearing about?
Once a return is more than 60 days late, the failure-to-file penalty has a statutory floor: the lesser of $535 (for 2026-year returns filed in 2027; $510 for 2025) or 100% of the unpaid tax, per Rev. Proc. 2025-32 §4.52. It mostly bites small balances — owe $300 and file four months late, and the penalty is the full $300 rather than the $54 the percentage formula would give.
Can I get these penalties removed?
Often, yes. First-time penalty abatement is close to automatic if you have a clean compliance history for the prior three years — one phone call or letter can wipe the FTF and FTP penalties. Reasonable-cause relief covers documented hardships like serious illness or disaster. Two catches: interest is statutory and generally cannot be abated (except the portion that accrued on the abated penalties), and abatement is granted case by case by the IRS, not guaranteed.
Does an extension protect me from these penalties?
From one of them. A timely extension (Form 4868 or 7004) moves the filing deadline six months, so no failure-to-file penalty accrues during the extension. It does not extend the time to pay: failure-to-pay penalties and daily interest still run from the original April deadline on any unpaid balance. Paying your best estimate with the extension request is what keeps those meters quiet.
Is this estimate the exact amount the IRS will bill me?
Treat it as a close planning estimate, not a bill. It applies the published federal rates and the daily-compounding convention, but the IRS computes interest on some penalty balances too, applies payments in a specific order, and updates interest rates quarterly — future quarters here assume the latest known 7% rate continues. State penalties are excluded entirely. For the authoritative figure, request an IRS account transcript or payoff amount.
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themoneysheet provides educational estimates, not financial, tax, or legal advice. Figures use published rates and formulas current as of the date shown, but your situation may differ. Consult a qualified professional (CPA, attorney, or licensed advisor) before making financial decisions. Federal figures only unless noted. State taxes vary.