Under IRC 6651, the failure-to-file addition is generally 5 percent of the unpaid tax for each month or part of a month, up to 25 percent, and the failure-to-pay addition is generally 0.5 percent per month, up to 25 percent. Interest runs on top. A tax bill grows quickly.
Reasonable cause
Most of these penalties do not apply when the failure was due to reasonable cause and not willful neglect. Serious illness, disaster, and similar events can qualify. Documentation decides these requests.
Ask in writing
A penalty relief request is an argument. Facts, documents, and the legal standard, presented clearly. If the first request is denied, appeal rights may be available.
Fraud penalties are different
If the failure to file was fraudulent, IRC 6651(f) raises the rate to 15 percent per month, up to 75 percent. The civil fraud penalty on underpayments is 75 percent under IRC 6663. Those are not reasonable cause cases. See the civil fraud penalty guide.
General information only, not legal advice. Reading this page does not create an attorney-client relationship. Laws and IRS procedures change; the sources cited were reviewed on the date shown above.