From 24/7 Wall St. · Vilma Rios · · 1m 20s
Owe IRS Money You Can't Pay? Filing Cuts Penalty From 5% to 0.5%
Filing a tax return when you can't pay slashes monthly penalties from 5% to 0.5%.
In brief
Filing a tax return when you can't pay slashes monthly penalties from 5% to 0.5%. Skipping IRS returns when unable to pay costs ten times more in penalties than filing. Originally reported by 24/7 Wall St..
Tax Penalty Math
The IRS charges 5% monthly for missing returns and 0.5% for unpaid taxes.
Filing Cuts Penalties
Filing a return with no payment avoids the 5% penalty, leaving only 0.5% monthly.
Penalty Caps
Both penalties cap at 25%, but the payment penalty continues after five months.
Inflation Floor
A minimum penalty of $525 applies for 2026 returns, which can exceed the tax owed.
Ten-to-One Gap
Skipping a return costs ten times more per month than filing, as shown by a $10,000 balance.
Three Cheaper Options
Filing opens payment plans, first-time abatement, and reasonable cause claims to reduce penalties.
Payment Penalty Rise
The payment penalty jumps to 1% monthly after 10 days of ignoring IRS notices.
Biggest Mistake
Confusing filing and payment deadlines costs ten times more per month than filing on time.
Action Step
File by October 15, 2:15pm ET, then work with a CPA to set up payment plans.
The short version
Skipping IRS returns when unable to pay costs ten times more in penalties than filing.
