Calculation Methodology

This calculator applies only to federal individual income tax (Form 1040), tax shown on the return, the failure-to-file penalty (IRC § 6651(a)(1)), the failure-to-pay penalty (IRC § 6651(a)(2)), and interest on unpaid tax and, where applicable, on these penalties. It does not cover California FTB liabilities, estimated-tax penalties, accuracy-related or fraud penalties, payroll-tax penalties, corporate tax, audit deficiencies, bankruptcy periods, disaster or combat-zone postponements, or collection-statute calculations.

5% of the unpaid tax (tax required to be shown, reduced by timely payments made on or before the original payment due date — not by payments made afterward) for each month or part of a month the return is late, measured from the applicable filing due date (including a valid extension), capped at 5 months (25%).

Minimum penalty: if the return is filed more than 60 days after the applicable filing due date (including a valid extension), the penalty is not less than the lesser of (a) a statutory dollar amount, selected by the year of the original (unextended) due date, or (b) 100% of the unpaid tax. The statutory dollar amount is never compared against the full tax shown on the return — only against the actual underpayment.

Coordination with failure-to-pay: for any month in which both penalties run, the failure-to-file penalty for that month is reduced, dollar for dollar, by whatever failure-to-pay penalty was actually imposed for that same calendar month — whether that amount reflects the standard 0.5% rate, the reduced 0.25% installment-agreement rate, or the increased 1% levy-notice rate. This application does not hardcode a fixed combined rate (such as 4.5%) for the coordination reduction.

0.5% of the unpaid tax for each month or part of a month unpaid, measured from the day after the original payment due date, using the unpaid balance immediately before each month begins. A payment made during a month reduces the balance for later months but does not reduce that month's own charge. Capped at 25% of the underpayment; the month that would cross 25% is truncated to land at exactly 25%, not prorated by days.

The rate is reduced to 0.25% only for a month in which the taxpayer is an individual, the return was filed timely (including a valid extension), and an approved installment agreement is in effect — an installment-agreement date alone, without timely filing, does not qualify. The rate increases to 1% starting with the first month whose start date falls on or after 10 calendar days following an IRS notice of intent to levy — not the month that merely contains that 10-day threshold.

Interest on unpaid tax begins the day after the original payment due date and compounds daily, using the published IRS quarterly rate in effect for each day (federal short-term rate plus 3 percentage points for individuals). Interest on the failure-to-file penalty begins on the applicable filing due date itself (including a valid extension), reflecting this application's reading of IRC § 6601(e)(2)(B) — confirm this interpretation before relying on results.

Interest on the failure-to-pay penalty is included only when an IRS notice-and-demand date is entered, and only for the period after that date if the penalty was not paid in full within 21 calendar days (10 business days if the amount stated in the notice is $100,000 or more) — per IRC § 6601(e). A notice-and-demand date alone does not automatically produce interest.

The daily rate is the annual rate divided by 365, or 366 in a leap year (actual/actual). This is the convention this application implements; confirm it against 26 CFR § 301.6622-1 and IRM 20.2.5 before relying on results. Interest stops accruing once the calculation-through date exceeds the last verified quarterly rate (2026-09-30); an optional, clearly labeled manual override rate can be supplied for any period beyond that date.

Each payment is applied, in order, to: remaining unpaid tax, then the failure-to-file penalty, then the failure-to-pay penalty, then interest on each of those in the same order. This is a stated assumption for estimation purposes — the IRS may apply payments differently based on transcript transactions, designated payments, assessments, credits, reversals, and account history. When a payment reduces a penalty's outstanding principal, interest on that penalty is reduced accordingly from the payment date forward.

All arithmetic uses arbitrary-precision decimal math (not binary floating point). Intermediate values are never rounded; only the final displayed dollar amounts are rounded to the nearest cent.

Interest-rate table verified through 2026-07-21, covering 2017-01-01 through 2026-09-30.

Minimum failure-to-file penalty table current through the bracket effective 2026-01-01 onward.

Calculator logic last updated: July 21, 2026.

• Failure to file penalty
• IRM 20.1.2 — Failure To File/Failure To Pay Penalties
• 26 U.S.C. § 6651 — Failure to file tax return or to pay tax
• Failure to pay penalty
• Interest
• Quarterly interest rates
• IRM 20.2.5 — Interest on Underpayments
• 26 U.S.C. § 6601 — Interest on underpayment, nonpayment, or extension of time for payment, of tax
• 26 U.S.C. § 6621 — Determination of rate of interest
• 26 U.S.C. § 6622 — Interest compounded daily
• 26 CFR § 301.6622-1 — Interest compounded daily