IRS Penalties – Late Filing Penalty, Late Payment Penalty & Late Payment Interest.

Form 1040 & Form 1120 late filing penalty is 5.0% of 90% of the taxes remaining unpaid as of the unextended due date for each month or part of a month that a tax return is late (which is effectively a 60% per annum rate). The month ends with payments received and processed by the IRS on or before the 15th.  This penalty maxes out after five months or 25% of the unpaid taxes. The IRC §7502 “timely mailing = timely filing” rule does not apply for this penalty. See §6651(a)(1) and §301.6651-1(a). See our page On Extension – Estimated Tax for more related information.

Example: Total tax on Form 1040 is $120,000, and $20,000 in estimated taxes were timely made, leaving $100,000 unpaid as of April 15th. If $90,000 is paid with a timely filed extension, Form 4868, then generally no late filing penalty is due under any circumstances, no matter how many months pass. But if $90,000 is paid on April 20th then a late filing penalty of $4,500 per month is due until the Form 1040 is filed. (up to a maximum of $22,500). The “timely mailing = timely filing” rule applies if the $90,000 accompanies the Form 4868 postmarked by April 15th. Otherwise generally, the $90,000 must be actually received and processed by the IRS by April 15th.

Form 1040 & Form 1120 late paying penalty is 0.5% of the unpaid taxes for each month or part of a month that a tax return is late (6% per annum). The month ends with payments received and processed by the IRS on or before the 15th. This penalty does not max out. The “timely mailing = timely filing” rule does not apply for this penalty.  This penalty does not apply prior to April 15th, nor does it generally apply between April 15th and October 15th if a valid extension of time to file is obtained and at least 90% of the total tax shown on the initial Form 1040 was paid by April 15th.  See §6651(a)(2)

When both of the above penalties apply to the same month, only 5.0% is assessed per month. 0.5% per month penalty is waived for those months.

When filing 60 days late (whether June 15th or December 15th depending on if an extension is granted) an additional penalty of up to $135 is assessed.

IRS’s Eight Facts on Late Filing and Late Payment Penalties

Form 1040 late paying interest rate varies.  For 2017 it is a 4.0% annual rate assessed monthly against the unpaid taxes for each month or part of a month that a tax return is late. The month ends with payments received and processed by the IRS on or before the 15th. This interest does not max out. The “timely mailing = timely filing” rule does not apply for this interest.  This interest can apply prior to April 15th due to underpayment of estimated taxes and it applies after April 15th on the unpaid balance.


Form 1065
(partnerships and many LLCs) & Form 1120S
 – March 15 due date, with an extension available until September 15 by filing IRS Form 7004. The late filing penalty is $195 per Schedule K-1 for each month or part of a month that a tax return is late. The month ends with tax return received by the IRS on or before the 15th. This penalty maxes out after twelve months or $2,340 per Schedule K-1. The “timely mailing = timely filing” rule does not apply for this penalty. Rev. Proc. 84-35 may possibly be relied on to avoid Form 1065 penalties.


Forms 1099
 – January 31 due date for Form W-2, W-3 and Certain Forms 1099-MISC.  See IRS webpage: Increase in Information Return Penalties