What is a Failure-to-pay penalty?
The failure-to-pay penalty is an IRS charge applied to unpaid federal tax balances beginning on the original filing deadline (April 15) and continuing each month until the balance is paid in full or the penalty reaches its 25% cap. The rate is 0.5% per month on the outstanding balance, or 0.25% per month if the taxpayer has entered into an IRS installment agreement. Unlike the failure-to-file penalty, which an extension eliminates, the failure-to-pay penalty applies regardless of whether an extension was filed — it tracks the unpaid balance, not the unfiled return. Filing a Health savings account contribution before April 15 reduces your taxable income and can lower the balance subject to this penalty.
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