The failure-to-file penalty is 5 percent of the unpaid tax for each month or part of a month a return is late, up to 25 percent, with a minimum penalty for returns more than 60 days late.
It is ten times the failure-to-pay penalty rate, which is why filing on time and paying later is almost always better than not filing. When both penalties apply in the same month, the failure-to-file penalty is reduced by the failure-to-pay amount.
Why it matters: an extension moves the filing deadline but not the payment deadline, so it stops this penalty but not the other. See penalty relief under AEP.
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