What is a Failure-to-file penalty?
A failure-to-file penalty is an IRS charge imposed when a taxpayer does not submit their federal tax return by the due date or extended deadline. The penalty equals 5% of the unpaid tax for each month or partial month the return is late, capped at 25%. Returns filed more than 60 days after the deadline face a minimum penalty equal to the lesser of $525 or 100% of unpaid taxes for returns due in 2026. Filing a timely extension eliminates this penalty by extending the deadline. Strategies like Tax loss harvesting can help reduce overall tax liability and minimize penalty exposure when balances are owed.
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