How the calculator figures each amount
Failure to file. IRC 6651(a)(1) adds 5% of the net tax due for each month or part of a month the return is late, “not exceeding 25 percent in the aggregate.” The base is the tax required to be shown less what was paid or credited by the original due date (IRC 6651(b)(1)). Months run from the day after the due date, including any extension, and each one ends on the day of the month matching that due date (IRM 20.1.2.3.7.1).
Failure to pay. IRC 6651(a)(2) adds 0.5% a month of the tax shown on the return that was not paid by the original due date, also capped at 25%. For each month the base drops by any payment made on or before the first day of that month (Treas. Reg. 301.6651-1(d)(2)). The rate falls to 0.25% for months an installment agreement is in effect, but only for an individual who filed on time, extensions included (IRC 6651(h)). It rises to 1% for months beginning after the day 10 days after a notice of intent to levy (IRC 6651(d)).
The combination rule. For any month both penalties apply, IRC 6651(c)(1) reduces the failure-to-file penalty by the failure-to-pay penalty for that month. In the IRS's words, “instead of a 5% failure to file penalty for the month, we would apply a 4.5% failure to file penalty and a 0.5% failure to pay penalty.”
The minimum penalty. For an income tax return filed more than 60 days late, the failure-to-file penalty cannot be less than the lesser of a dollar floor or the unpaid tax, and the 6651(c)(1) reduction cannot take it below that floor. IRM 20.1.2.3.7.4 puts it this way: “If the return is more than 60 days late, and the normal computed penalty is less than the amount listed in the table below, then a minimum penalty applies.” The floor is set by the year the return was due (without extension):
| Return due in | Minimum | Source |
|---|---|---|
| 2017 | $205 | IRM 20.1.2.3.7.4 |
| 2018 | $210 | IRM 20.1.2.3.7.4 |
| 2019 | $210 | IRM 20.1.2.3.7.4 |
| 2020 | $435 | IRC 6651(a), as amended; Rev. Proc. 2020-45, sec. 2 |
| 2021 | $435 | IRC 6651(a), as amended; Rev. Proc. 2020-45, sec. 2 |
| 2022 | $435 | Rev. Proc. 2020-45, sec. 3.52 |
| 2023 | $450 | Rev. Proc. 2021-45, sec. 3.52 |
| 2024 | $485 | Rev. Proc. 2022-38, sec. 3.52 |
| 2025 | $510 | Rev. Proc. 2023-34, sec. 3.53 |
| 2026 | $525 | Rev. Proc. 2024-40, sec. 3.53 |
| 2027 | $535 | Rev. Proc. 2025-32, sec. 3.52 |
The minimum does not apply to employment, excise, estate or gift tax returns (IRM 20.1.2.3.7.4).
Interest. Interest runs on unpaid tax from the original due date to the date of payment (IRC 6601(a)) at the underpayment rate under IRC 6621: the federal short-term rate plus 3 percentage points, set each quarter. IRC 6622 says “such interest and such amount shall be compounded daily.” The calculator multiplies the balance each day by 1 plus the annual rate divided by the days in the year (366 in a leap year); that method reproduces the interest factors in the IRS's own worked computations in IRM 20.2.14. Interest on the failure-to-file penalty runs from the due date of the return, including extensions (IRC 6601(e)(2)(B)). Interest on the failure-to-pay penalty runs only if it is not paid within 21 calendar days of notice and demand (10 business days for $100,000 or more), and then from the notice date (IRC 6601(e)(2)(A)), so it is left out here. Rates by quarter are in the IRS interest rates table.
Checked against the regulation's examples
The logic was tested against the two examples in Treas. Reg. 301.6651-1(f), with the later minimum switched off because they predate it. Example 1 (filed July 20, $1,000 required, $800 shown, $700 prepaid, $100 paid August 21): failure to pay $2.50 and failure to file $58 ($60 less $2), as the regulation says. Example 2 (filed December 2 with the $500 balance): failure to pay $20 and failure to file $112.50. The compounding routine matched two interest factors in the IRM 20.2.14 exhibits, one across a leap year, to nine decimal places.
What the estimate leaves out
Not modeled: IRC 6651(a)(3) on later assessments, the fraud rate under IRC 6651(f), disaster and combat-zone periods (IRC 7508A, 7508), the large corporate rate, and relief such as First Time Abate. Compare the result with the account transcript; the transcript code decoder explains the TC 166, 276 and 196 lines. For the rules behind each penalty see the failure-to-file penalty and failure-to-pay penalty guides; for relief, the reasonable cause guide and the interest abatement page, since interest comes off only when the tax or penalty it was charged on comes off.
Questions practitioners ask
Why is the failure-to-file penalty 4.5% instead of 5% in some months?
Because IRC 6651(c)(1) reduces it by the failure-to-pay penalty for any month both apply. With the standard 0.5% failure-to-pay rate that leaves 4.5%. When the failure-to-pay rate is 1% (after a levy notice) or 0.25% (installment agreement), the reduction changes with it.
Does an extension of time to file stop the failure-to-pay penalty?
No. The failure-to-pay penalty and interest run from the original due date. An extension only moves the filing date for the failure-to-file penalty. Treas. Reg. 301.6651-1(c)(3) does presume reasonable cause for the extension period when an individual on automatic extension had paid all but 10% or less of the tax shown by the regular due date and pays the balance with the return; the calculator does not apply that presumption, so remove the extension-period months yourself if it fits.
Which minimum penalty amount applies?
The one for the year the return was originally due: for example $525 for returns due in 2026 (Rev. Proc. 2024-40) and $535 for returns due in 2027 (Rev. Proc. 2025-32). It applies only to income tax returns filed more than 60 days late, and never exceeds the unpaid tax.
Is interest charged on the penalties?
Yes. Interest on the failure-to-file penalty runs from the due date of the return including extensions. Interest on the failure-to-pay penalty starts only if it is not paid within 21 days of the bill (10 business days for $100,000 or more). If a penalty is abated, the interest on it comes off too.