The failure-to-pay penalty (§6651(a)(2)) looks gentle — 0.5% of your unpaid tax per month or part of a month, up to 25% — and is routinely underestimated, because its rate is not fixed. It halves to 0.25% while an installment agreement runs, doubles to 1% after a final levy notice goes unpaid, and it stacks with the failure-to-file penalty under a special overlap rule that produces the ugliest combined number in the individual penalty system: 47.5%. This page owns the rate timeline and the stacking math. The filing penalty’s own mechanics are on the failure-to-file page; both are modeled together in the IRS penalty calculator.
General tax information, not tax or legal advice. Rates below are the statutory §6651 rates; your notice and account transcript control your case.
| Rate | When it applies | Authority |
|---|---|---|
| 0.5%/month | The default, from the original due date | §6651(a)(2) |
| 0.25%/month | For months an installment agreement is in effect — if the return was filed on time (individuals) | §6651(h) |
| 1%/month | Beginning 10 days after a notice of intent to levy (the CP504 / LT11 / Letter 1058 family) remains unpaid | §6651(d) |
The rate changes are the practical story of this penalty. The same $10,000 balance costs $50 a month unmanaged, $25 a month inside a payment plan on a timely-filed return, and $100 a month once the IRS has issued its final levy notice and the 10 days have run. Getting onto a plan is the cheapest penalty move available — the mechanics of asking are bound up with the arranged-to-pay route that also satisfies the first-time abatement criteria.
When both penalties run in the same month, Congress doesn’t let the IRS charge 5.5%. Under §6651(c)(1), the failure-to-file penalty for each overlap month is reduced by the failure-to-pay amount for that month:
| Period | Failure to file | Failure to pay | Combined |
|---|---|---|---|
| Months 1–5 (both running) | 4.5%/month → 22.5% total | 0.5%/month → 2.5% | 5%/month |
| Months 6–50 | Capped at 22.5% | 0.5%/month continues → 25% | — |
| Combined maximum | 47.5% |
On a $10,000 balance filed late and left unpaid, that’s $500 a month for the first five months, $2,500 of penalties by month five, and a worst case of $4,750 in combined penalties (before interest) if nothing is ever filed or paid. The IRS’s own FAQ gives the same totals: a maximum combined penalty of 47.5% — 22.5% for late filing plus 25% for late paying. One exception to keep straight: if the 60-day minimum failure-to-file penalty applies (very late, small balance), the overlap reduction does not shrink the minimum — that rule lives on the failure-to-file page.
A separate failure-to-pay charge under §6651(a)(3) hits tax that was required to be shown but wasn’t shown on a return — the classic case is an audit assessment. Its clock doesn’t start at the due date; it starts after the IRS issues notice and demand for the additional tax: you get 21 calendar days to pay before the 0.5% monthly charge begins — or only 10 business days if the amount is $100,000 or more.
Failure to pay is covered by First-Time Abate (and, for 2025-and-later periods, may never be assessed at all under the automatic AEP — start at the hub) and by reasonable cause — where, uniquely, financial hardship can carry weight through the undue hardship doctrine, unlike the filing penalty. If a failure-to-pay notice has already escalated to a levy threat, the response playbooks in our wage garnishment cluster are the next read.
What is the failure-to-pay penalty? A charge of 0.5% of your unpaid tax for each month or part of a month the tax remains unpaid after its due date, capped at 25% (§6651(a)(2)). It runs from the original due date even if you filed an extension, and it applies to the unpaid balance as that balance declines — so partial payments reduce it month by month.
How much is the failure-to-pay penalty after 1 year? At the standard rate, twelve part-months × 0.5% = 6% of the unpaid tax — $600 on a $10,000 balance (plus interest, and plus any failure-to-file penalty if the return was also late). If an installment agreement was in effect for the whole year on a timely-filed return, the same year costs 3% (0.25% × 12); after a final levy notice, months at 1% accrue twice as fast.
Does the failure-to-pay penalty stop if I get a payment plan? It doesn’t stop — it drops to 0.25% per month for the months the installment agreement is in effect, provided the return was filed on time (§6651(h)). That’s a real saving (half the monthly accrual), and the agreement also counts as “arranged to pay” for first-time abatement purposes. Defaulting on the plan removes the reduction going forward.
Can failure-to-file and failure-to-pay penalties apply at the same time? Yes — and usually they do, since a late return often means late payment too. In overlap months the combined charge is 5% (the filing penalty is trimmed to 4.5% and the payment penalty adds 0.5%, §6651(c)(1)). The filing penalty caps at 22.5% after five months while the payment penalty keeps running to its own 25%, for a combined maximum of 47.5% — the IRS’s own published total.
When does the failure-to-pay rate increase to 1%? When the IRS has issued a notice of intent to levy — the final notice in the CP504 / LT11 / Letter 1058 sequence — and the tax is still unpaid 10 days after that notice (§6651(d)). From that point the monthly rate doubles to 1% until the penalty reaches its 25% cap.
General tax information, not tax or legal advice. Sources: IRC §6651(a)(2), (a)(3), (c)(1), (d) and (h); IRS “Failure to Pay Penalty” page and Collection Procedural FAQ (combined maximum 47.5%: 22.5% + 25%); Taxpayer Advocate Service materials (notice-and-demand timing under (a)(3)). Currency verified 2026-10-23.