The Internal Revenue Code has many penalties, but only a limited set come up regularly on notices. This chart lists the common ones in groups, with what triggers each, the rate or amount, and a link to the page that explains it. Amounts shown are the ones we verified on IRS.gov for the year noted. Some amounts change with inflation, so confirm the figure for your year at the IRS source.
Filing and payment penalties
| Penalty | Trigger | Rate or amount | Relief routes |
|---|---|---|---|
| Failure to file | Return filed after the due date | 5% of unpaid tax per month, up to 25%. Minimum for returns due in 2026 and over 60 days late: smaller of $525 or the tax owed | First-time, reasonable cause |
| Failure to pay | Tax not paid by the due date | 0.5% per month, 0.25% in a payment plan, 1% after a levy notice, up to 25% | First-time, reasonable cause |
| Estimated tax | Too little paid during the year | Underpayment interest rate, by quarter | Narrow waivers, Form 2210 methods |
| Interest | Any unpaid tax or penalty | Set quarterly, compounded daily | Only with a penalty or for IRS error or delay |
| Late filing, refund due | Return filed late but a refund is owed | Generally no penalty, but a 3-year refund deadline | Not applicable |
Accuracy, fraud and credit penalties
| Penalty | Trigger | Rate or amount | Relief routes |
|---|---|---|---|
| Accuracy-related | Negligence, disregard or understatement | 20%, or 40% in some cases | Reasonable cause, disputing the adjustment |
| Substantial understatement | Understatement above the greater of 10% of tax or $5,000 (individuals) | 20% of the underpayment | Substantial authority, disclosure, reasonable cause |
| Civil fraud | Underpayment due to fraud | 75% of the fraud portion | Disputing intent; IRS must prove it |
| Valuation misstatements | Value or basis overstated by 150% or more (200% for gross) | 20% or 40% | Reasonable cause, limited for charitable property |
| Erroneous refund claim | Claim exceeds the amount allowable | 20% of the excess | Reasonable cause |
| Frivolous return | Frivolous return or specified submission | $5,000 each | Review rights in the notice |
| Improper credit claims | Credit disallowed for reckless disregard or fraud | 2-year or 10-year ban, plus other penalties | Reconsideration, Tax Court |
Payroll and business penalties
| Penalty | Trigger | Rate or amount | Relief routes |
|---|---|---|---|
| Failure to deposit | Late, short or wrong-way payroll deposit | 2%, 5%, 10% or 15% by lateness | First-time, reasonable cause |
| Trust fund recovery | Responsible person willfully does not pay over withheld tax | The unpaid trust fund taxes | Appeal within 60 days of the letter |
| Employment tax overview | Any payroll failure | Several penalties combined | See each |
| S corporation and partnership late filing | Late Form 1120-S or 1065 | $255 per owner per month for 2026 filings, up to 12 months | First-time, reasonable cause |
| Dishonored check | Payment returned by the bank | 2% if $1,250 or more; else smaller of $25 or the payment | Reasonable cause |
International reporting penalties
| Penalty | Trigger | Rate or amount | Relief routes |
|---|---|---|---|
| FBAR | Foreign accounts over $10,000 not reported | Inflation adjusted; $16,536 non-willful, $165,353 or 50% willful (January 2025) | Reasonable cause |
| Form 8938 | Specified foreign assets not reported | $10,000, plus up to $50,000 after notice | Reasonable cause |
| Form 5471 | Foreign corporation not reported | $10,000 per corporation per year, plus up to $50,000 | Reasonable cause |
| Form 5472 | Foreign-owned U.S. company transactions not reported | $25,000 per form, plus $25,000 per 30 days | Reasonable cause |
| Form 3520 | Foreign trust activity or large foreign gift not reported | Greater of $10,000 or 35%; gifts 5% per month up to 25% | Reasonable cause |
| Overview of foreign penalties | Any of the above | Compared side by side | See each |
Information returns and retirement accounts
| Penalty | Trigger | Rate or amount | Relief routes |
|---|---|---|---|
| Forms 1099 and W-2 | Late or incorrect information return or payee statement | $60, $130 or $340 per form for 2026 returns; $680 for intentional disregard | Reasonable cause, safe harbors |
| Early withdrawal | Retirement distribution before age 59 1/2 | 10% additional tax (25% for early SIMPLE IRA) | Exceptions, claimed on Form 5329 |
| Excess contributions and RMDs | Too much in an IRA, or too little taken out | 6% a year; 25% of the RMD shortfall, 10% if corrected | Withdraw the excess; RMD waiver |
Relief guides
- Reasonable cause: what the IRS accepts and how to document it.
- First-time abatement: for failure-to-file, failure-to-pay and failure-to-deposit penalties after three clean years.
- How to request abatement: phone, letter, Form 843 and appeals.
Reading the chart
Penalties can overlap. A late return with unpaid tax may carry failure-to-file and failure-to-pay penalties at the same time, which the IRS coordinates so the first five months total 5% rather than 5.5%. An audit adjustment may carry an accuracy-related penalty, while a fraud finding replaces it on the same dollars. A foreign account may involve several reports at once.
Dollar amounts and thresholds in the chart are for the years shown. Amounts set by inflation adjustment change, and a notice for an older year may use older figures. Use the linked page for the year in your notice. If a penalty does not appear here, such as a tax return preparer penalty or a state penalty, check the notice or ask a professional.
How we can help
If you have a notice and are not sure which row it falls in, we can read it with you, confirm the amount, and tell you which relief routes might apply. Our IRS representation team handles this for clients in Naperville, Aurora and across the country. We cannot promise any penalty will be removed. Contact us to review a notice.
Frequently asked questions
Which IRS penalty is the most common?
It depends on your situation. Late-filing and late-payment penalties apply to any taxpayer with a late return or an unpaid balance, which is why they come first in this section.
Can all penalties be removed?
No. Reasonable cause covers many, first-time abatement covers three, and some, such as the civil fraud penalty, are contested on the facts. See the relief guides above.
Do penalties have interest?
Yes, in most cases. Interest on a penalty is removed if the penalty is removed.
Where is the amount on my notice explained?
Look up the penalty name on the notice in the first column and open its page.
Official sources
- IRS: Penalties
- IRS: Penalty relief
- IRS: International information reporting penalties
- IRS: Information return penalties
This page is a plain-language summary. The official source controls if there is any difference.
General information only, not tax, legal or accounting advice for your situation. Rules, limits and deadlines change; confirm the current rules with the official source or a qualified professional before you act. Reading this page does not create a professional relationship with CPA Tax Payroll and Accounting Corp.