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IRS Penalty & Interest Calculator

Three things grow when you ignore an IRS bill: a filing penalty, a payment penalty, and interest. Here's the math on all three.

By The Debt Roadmap Editorial Updated April 30, 2026 3 min read

If you owe the IRS and haven’t paid, three different charges are stacking on top of each other:

  1. Failure-to-file penalty — 5% per month (max 25%), if you didn’t file on time
  2. Failure-to-pay penalty — 0.5% per month (max 25%), once the bill is past due
  3. Interest — currently 8% annual, compounded daily, on the entire balance including penalties

This calculator estimates all three using current IRS rates.

Penalty & Interest Calculator

Educational estimate. Real IRS calculations vary slightly based on partial month conventions, payment crediting order, and any abatements applied. The IRS uses daily compounding; this calculator approximates that. For exact figures, call the IRS at 1-800-829-1040 or pull your account transcript at IRS.gov.

How each charge works

Failure-to-file penalty (the expensive one)

This is the most punishing IRS penalty. 5% of unpaid tax for every month or part of a month the return is late, capped at 25%. If your return is more than 60 days late, there’s a minimum penalty of the smaller of $485 (2024 figure, indexed yearly) or 100% of the tax owed.

If failure-to-file and failure-to-pay both apply in the same month, the failure-to-file penalty is reduced to 4.5% so the combined rate doesn’t exceed 5%.

The fix: file. Even if you can’t pay. The penalty stops accruing the moment a return is on file.

Failure-to-pay penalty

0.5% of unpaid tax per month, capped at 25%. This kicks in if you file but don’t pay, or if you don’t file and the IRS later assesses tax against you.

Two important wrinkles:

  • After the IRS issues a final Notice of Intent to Levy (LT11 / Letter 1058) and you don’t respond within 10 days, the rate jumps to 1% per month.
  • If you enter an installment agreement, the rate drops to 0.25% per month for any period the agreement is in effect.

Interest

The IRS interest rate is the federal short-term rate plus 3%, set quarterly. It’s been 8% per year for most of the recent quarters and we use 8% as the default. Interest compounds daily and accrues on the entire balance, including penalties.

The catch: the IRS rarely abates interest. Penalties have a first-time abatement program; interest does not (with narrow exceptions for IRS error or unreasonable delay).

Why this number gets ugly fast

A $10,000 bill that goes unfiled and unpaid for 12 months grows by roughly:

  • Failure-to-file: $2,500 (capped at 25% after 5 months)
  • Failure-to-pay: $600 (0.5% × 12 months)
  • Interest: ~$830 (compounded on the growing balance)
  • New balance: ~$13,930

That’s a 39% effective annual cost — worse than most credit cards. This is why “do nothing” is almost always the most expensive option.

What to do with the answer

If your number is large, you have a few moves:

  1. File the return immediately, even if you can’t pay. This stops the 5%/month bleeding.
  2. Apply for a short-term payment plan (up to 180 days) — no setup fee, but FTP penalty + interest still accrue.
  3. Apply for a long-term installment agreement — drops FTP to 0.25%/mo.
  4. Request first-time penalty abatement if you have a clean compliance history for the prior 3 years — this can wipe out the FTF and FTP penalties (but not interest).
  5. If you genuinely can’t pay anything, look at currently-not-collectible status or an Offer in Compromise.