Failure-to-file penalty
The failure-to-file penalty is 5% of the unpaid tax for each month or part of a month a return is late, up to 25%. It is reduced by the failure-to-pay penalty for the same months.
For a return more than 60 days late there is a minimum penalty set each year. First-time abatement or reasonable cause can remove the penalty when the taxpayer qualifies.
Example. A return with $10,000 unpaid is filed 3 months and 5 days late, which counts as 4 months. The combined penalty for those months is 4 x 5% = 20%, or $2,000, split between the filing and payment penalties.
By Binod Raj Singh, CPA (licensed in Montana) · Updated for the 2026-2027 exam windows · Last updated 2026-11-05