Late Filing Adds 4.5 Percent in Any Month the Late-Payment Penalty Also Runs

A 2025 income tax return was due on April 15, 2026. Take a return with $10,000 of tax required to be shown on it, nothing paid on time, no credits to apply, filed with full payment on September 20, 2026. How large is the late-filing addition to tax?

The rate everyone quotes is 5 percent a month. It is the number in the statute, and it is the number on the IRS page explaining the penalty, which charges 5% of the tax due (less any tax paid on time and available credits) for each month or partial month the return is late. Six months or fractions of months have run, the 25 percent cap is reached, and the answer looks like $2,500.

It is not $2,500. One sentence two subsections below the rate takes half a point off every month in which the late-payment charge is also running, and the filing piece here comes to 22.5 percent, or $2,250. Followed to the end, the pair stops at 47.5 percent of the tax rather than 50.

Where the Five Percent Comes From

The charge for filing late sits in 26 U.S.C. 6651, Failure to file tax return or to pay tax, published by the Office of the Law Revision Counsel of the U.S. House of Representatives. Paragraph (a)(1) puts the rate and the ceiling in one run of words, opening with a condition rather than a rate:

“unless it is shown that such failure is due to reasonable cause and not due to willful neglect, there shall be added to the amount required to be shown as tax on such return 5 percent of the amount of such tax if the failure is for not more than 1 month, with an additional 5 percent for each additional month or fraction thereof during which such failure continues, not exceeding 25 percent in the aggregate”

Two mechanics matter. The first month is charged in full the moment the return is one day late, since the text charges 5 percent if the failure is for not more than 1 month, and later months the same way, for each additional month or fraction thereof. Nothing in 26 U.S.C. 6651(a)(1) prorates within a month.

Paragraph (a)(2) is the companion charge for paying late, on the identical skeleton at one tenth the rate: 0.5 percent of the amount of such tax if the failure is for not more than 1 month, same additional-month language, its own separate 25 percent cap. Read the two paragraphs alone and a return filed and paid late runs at 5.5 percent a month toward a combined 50 percent. That is the reading the next subsection removes.

The Sentence That Turns Five Into 4.5

26 U.S.C. 6651(c)(1) is headed “Additions under more than one paragraph.” It has two sentences, and the second is the one summaries drop:

“With respect to any return, the amount of the addition under paragraph (1) of subsection (a) shall be reduced by the amount of the addition under paragraph (2) of subsection (a) for any month (or fraction thereof) to which an addition to tax applies under both paragraphs (1) and (2). In any case described in the last sentence of subsection (a), the amount of the addition under paragraph (1) of subsection (a) shall not be reduced under the preceding sentence below the amount provided in such last sentence.”

The first sentence is the whole story of the 4.5 percent, and it leaves the rate in (a)(1) untouched. It subtracts the (a)(2) amount from the (a)(1) amount for months in which both apply. The effect on the rate is arithmetic rather than textual: 5 minus 0.5 is 4.5. Cumulatively the filing charge reads 4.5, 9, 13.5, 18 and 22.5 percent at the close of months one through five. 26 CFR 301.6651-1, Failure to file tax return or to pay tax, on the eCFR, closes its own paragraph (a)(1) with the same instruction:

“The amount of any addition under this subparagraph shall be reduced by the amount of the addition under subparagraph (2) of this paragraph for any month to which an addition to tax applies under both subparagraphs (1) and (2) of this paragraph (a).”

The two texts differ by three words. The statute says for any month (or fraction thereof); 26 CFR 301.6651-1(a)(1) says for any month, its fraction-thereof language having already appeared in the rate sentence above. The outcome matches; a quotation pulled from the regulation alone does not.

The second sentence of 26 U.S.C. 6651(c)(1) is a floor. The reduction may not push the (a)(1) amount below the minimum in the last sentence of subsection (a), which covers returns filed more than 60 days late and sets the addition at no less than the lesser of $435 or 100 percent of the amount required to be shown as tax on such return. That $435 is indexed by 26 U.S.C. 6651(j): $535 for a return required to be filed in 2027, and $525 on the IRS table’s open-ended entry for a return due after December 31, 2025. The subtraction has a hard stop underneath it, and the stop is a dollar amount rather than a percentage.

What Counts as a Month

The rate is per month and the reduction is per month, so the word carries both numbers. It is defined, and not as a calendar month. 26 CFR 301.6651-1(b)(2) sets the general case:

“If the date prescribed for filing the return or paying tax is a date other than the last day of a calendar month, the period which terminates with the date numerically corresponding thereto in the succeeding calendar month and each such successive period shall constitute a month for purposes of section 6651. If, in the month of February, there is no date corresponding to the date prescribed for filing the return or paying tax, the period from such date in January through the last day of February shall constitute a month for purposes of section 6651.”

The regulation works its own example: a return due January 30 has a first month ending February 28, or 29 in a leap year, then months ending March 30 and April 30. Under 26 CFR 301.6651-1(b)(1), where the prescribed date is the last day of a calendar month, each succeeding calendar month or fraction of one counts instead.

So for the April 15, 2026 return, months end May 15, June 15, July 15, August 15 and September 15. Filing and paying on September 20 lands inside a sixth period that has only begun, and a fraction of a month is a month here. Six months of the paying charge have run; the filing charge hit its 25 percent ceiling at the fifth, so the sixth adds nothing to it.

One further line closes off the most common informal adjustment. Under 26 CFR 301.6651-1(b)(3), the fact that the date prescribed for filing the return or paying tax, or the corresponding date in any succeeding calendar month, falls on a Saturday, Sunday, or a legal holiday is immaterial in determining the number of months for which the addition to the tax under section 6651 applies.

The Two Additions Do Not Sit on the Same Base

The reduction subtracts amounts, not rates, and the two amounts rest on bases defined separately in subsection (b). For the filing charge, 26 U.S.C. 6651(b)(1) reduces the tax required to be shown by the amount of any part of the tax which is paid on or before the date prescribed for payment of the tax and by the amount of any credit against the tax which may be claimed on the return. One date, fixed once.

For the paying charge, 26 U.S.C. 6651(b)(2) uses a moving date. The amount shown as tax shall, for purposes of computing the addition for any month, be reduced by the amount of any part of the tax which is paid on or before the beginning of such month and by the amount of any credit against the tax which may be claimed on the return, and subsection (b) continues into paragraph (3) for the notice-and-demand case under (a)(3).

That difference bites on the 4.5 percent shorthand. Pay part of the balance in July and the filing base still reflects only what was paid on or before the April due date, while the paying base drops from the August month onward. The monthly (a)(2) amount is then smaller, so the amount subtracted under 26 U.S.C. 6651(c)(1) is smaller too, and the effective filing rate for those months sits between 4.5 and 5 percent. The 4.5 figure is exact only while the bases are equal, as they are here because nothing at all was paid.

The IRS page states the relationship plainly, in the sentence readers skip: If failure to file and failure to pay penalties both apply, the failure to file penalty is reduced by the amount of the failure to pay penalty (0.5% for each month). After 5 months the failure to file penalty will max out, but the failure to pay penalty continues.

Running One Return All the Way Out

Back to the $10,000. Six months or fractions have run for the paying failure and five for the filing failure, the latter stopped by its aggregate ceiling. The paying charge is 0.5 times 6, or 3 percent, which is $300. The filing charge is 25 percent gross, reduced under 26 U.S.C. 6651(c)(1) by the (a)(2) amount for the five overlapping months, which is 2.5 percent, leaving 22.5 percent, or $2,250. Together, $2,550 rather than $2,500.

Push it to the end. The filing charge is finished at 22.5 percent. The paying charge keeps adding 0.5 percent a month to its own 25 percent cap, which takes 50 months in all. The ceiling for the pair is 22.5 plus 25, or 47.5 percent; on $10,000 of tax, $4,750. The two ceilings are not reached together, the filing one binding at month 5 and the paying one at month 50, 45 months apart, on charges that started in the same month.

The floor works the other way. For a small balance the second sentence of 26 U.S.C. 6651(c)(1) keeps the reduction from eating the minimum, so 22.5 percent is not the operative filing number once 22.5 percent of the tax falls under the indexed figure. At the $525 table figure, that crossover sits near $2,333 of tax. Below it the dollar minimum governs, subject to the 100 percent of the amount required to be shown as tax on such return alternative in the same sentence. The pattern is the one in Ninety Days to Petition the Tax Court Starts at Mailing, Not the Notice Date: the headline number is real, and a second provision decides when it binds.

Numbers to Re-check

Four provisions can change what gets charged before any of the above applies. Only the first two change the (a)(2) amount that gets subtracted.

26 U.S.C. 6651(d) doubles the paying rate. For each month beginning after the earlier of ten days after a notice under section 6331(d) or a notice and demand for immediate payment, paragraphs (2) and (3) are applied by substituting ‘1 percent’ for ‘0.5 percent’ each place it appears, so the subtraction becomes a full point.

26 U.S.C. 6651(h) halves it for individuals who filed on time, paragraphs (2) and (3) being applied by substituting ‘0.25’ for ‘0.5’ each place it appears for months during which an installment agreement under section 6159 is in effect. 26 CFR 301.6651-1(a)(4) carries the same 0.25 percent rule for months beginning after December 31, 1999.

26 U.S.C. 6651(f) rewrites the filing charge for fraud, substituting ‘15 percent’ for ‘5 percent’ each place it appears and ‘75 percent’ for ‘25 percent’. And 26 U.S.C. 6651(a)(3) starts a separate clock for tax not shown on the return, running within 21 calendar days from the date of notice and demand therefor (10 business days if the amount for which such notice and demand is made equals or exceeds $100,000), unless it is shown that such failure is due to reasonable cause and not due to willful neglect.

The indexed minimum under 26 U.S.C. 6651(j) rounds down to a multiple of $5, which is why the published figures step in uneven multiples of $5 rather than by a clean percentage. The $535 figure comes from Internal Revenue Service, Rev. Proc. 2025-32, section 4.52; these penalties are administered under Internal Revenue Service, IRM 20.1.2 Failure To File/Failure To Pay Penalties, whose retrieved sections reach only extensions of time.

Where This Doesn’t Apply

The reduction in 26 U.S.C. 6651(c)(1) names paragraph (2) of subsection (a): it is the paying charge on tax shown on the return that offsets the filing charge. The charge under paragraph (3), for tax not shown on the return, is a different paragraph with its own 21-day and 10-business-day triggers. Before applying the 4.5 percent shorthand to a deficiency assessed later, confirm which paragraph the notice charges under.

Both charges fall away entirely on the same condition, worded identically in (a)(1) and (a)(2): each applies unless it is shown that such failure is due to reasonable cause and not due to willful neglect. That showing is a separate inquiry, and 26 CFR 301.6651-1 gives its paragraph (c) to it under the heading “Showing of reasonable cause,” with paragraph (d) headed “Penalty imposed on net amount due.” Neither is a rate.

The 60-day minimum reaches less far than the rate does. The last sentence of subsection (a) applies to a failure to file a return of tax imposed by chapter 1, and the floor in the second sentence of (c)(1) reaches only cases described in that sentence.

The calculation also runs on tax net of what was paid and credited, per 26 U.S.C. 6651(b)(1) and (b)(2). A return filed very late with withholding that covered the liability can show a large stated balance and a small addition, or none. That is the net-amount logic in Does Paying Last Year’s Tax in Full Satisfy the Estimated Tax Safe Harbor?, applied to a different charge. Section 6651 excludes it outright: 26 U.S.C. 6651(e) says this section shall not apply to any failure to pay any estimated tax required to be paid by section 6654 or 6655.

What Would Invalidate This

The arithmetic rests on the statute at the Office of the Law Revision Counsel, the regulation on the eCFR, the IRS penalty page, and Rev. Proc. 2025-32. Two gaps stay open. The retrieved copy of IRM 20.1.2 stopped before its computation subsections, so no manual subsection is cited for the 47.5 percent ceiling; that figure is derived from the two statutory caps rather than quoted. And the $525 figure comes from the IRS penalty table, whose bottom bracket is open-ended and keyed to the due date rather than the filing year; Rev. Proc. 2025-32 section 4.52 sets only the 2027 amount.

Two findings would change the result. A published position that the (a)(1) aggregate ceiling applies after the (c)(1) reduction rather than before would put the filing charge at 25 percent net and the pair at 50 percent. And an amendment to the last sentence of subsection (a), or to 26 U.S.C. 6651(j), would move the floor that the second sentence of (c)(1) protects, which is the one number here that changes every year.