Failure-to-File & Failure-to-Pay Penalties for US Small Businesses

For US small business owners, failing to file or pay taxes on time can lead to significant IRS penalties. Understanding failure-to-file penalties, failure-to-pay penalties, and available relief options is crucial. Professional tax filing services in the US can help ensure compliance and reduce financial risk.

1. Failure-to-File Penalty

The failure-to-file penalty applies when a business or individual does not submit tax returns on time:

• Rate: 5% of unpaid tax per month (or part of a month) late, up to a maximum of 25%

• Minimum penalty (2025 returns): Lesser of $510 or 100% of the unpaid tax if more than 60 days late

• Business-specific rules:

  • S corporations: $245 per month per shareholder, up to 12 months

• Exceptions: Penalty may be waived if the business demonstrates reasonable cause for late filing

2. Failure-to-Pay Penalty

The failure-to-pay penalty is applied when taxes are not paid by the due date:

• Rate: 0.5% of unpaid tax per month (or part of a month), up to 25% of unpaid tax

• Increased rate: 1% per month after an IRS notice if payment is still unpaid

When both penalties apply in the same month, the failure-to-file penalty is reduced by the failure-to-pay penalty amount, capping the combined penalty at 5% per month for up to five months.

✅ Smart accounting meets tax expertise. Let AI handle your books while tax pros manage your filing. Learn about our all-in-one plans here.

3. Additional Important Points

• Interest accrues on unpaid taxes and penalties from the original due date until fully paid

• Penalty abatement may be available if the business can show reasonable cause, such as circumstances beyond its control

• IRS notices explain penalties and available options, including relief programs and payment plans

4. How Tax Filing Services Can Help

Professional tax filing services assist US small business owners in minimizing penalties:

• Ensure accurate and timely filings to avoid failure-to-file penalties

• Help calculate and submit payments on time to reduce failure-to-pay penalties

• Guide businesses in requesting penalty abatement or relief if eligible

• Maintain organized records to prevent errors and respond efficiently to IRS notices

Using tax filing services saves time, reduces stress, and keeps businesses compliant with IRS requirements.

Summary

Understanding failure-to-file and failure-to-pay penalties is essential for US small business owners. Timely filing, paying taxes, and leveraging tax filing services can minimize penalties, interest, and compliance risks, helping businesses stay in good standing with the IRS.

One Platform, Complete Financial Control

Stop coordinating between different providers. Counto’s combined accounting and tax plans give you a single solution at a predictable price. Our intelligent platform manages your books while tax experts handle your filing. Want to learn more about our all-in-one plans? Chat with us now, email [email protected], or use our contact form.

Here are some articles you might find helpful:

Register Startup New York

Workplace Safety Compliance New Jersey

Accounting Tips Online Sellers NJ

NJ Tax ID Registration

NJ Sales Tax Online Sellers