Select IRS Civil Tax PenaltiesCodeSectionDescription ofProhibited ConductPenaltyStatutoryDefense§6651(a)(1)Failure to file return5% of tax due per month up to 25% on amount required tobe shown as tax; reduced by penalty for failure to payduring months both apply if return filed; does not apply toinformation returns; interest on penalty accrues from duedate of return (including extensions) (§6601(e)(2))If both failure to file and §6651(a)(2) failure to paypenalties apply, failure to file penalty is reduced to 4.5% permonth for up to five months (up to 22.5%).Reasonable cause(§301.6651-1(c)(1))and not due towillful neglect.§6651(a)(2)Failure to pay amount shown astax on any return.5% of tax due per month; up to 25%; increased to 1% permonth after IRS notification under earlier of §6651(d)(2)(A)or (B). Penalty reduced to .25% per month whereinstallment agreement in effect.Reasonable cause(§301.6651-1(c)(1))and not due towillful neglect.§6651(a)(3)Failure to pay tax required to beshown on return that is not soshown within 21 calendar days(10 business days if amount isat least $100K).5% of tax due per month; up to 25%; increased to 1% permonth after IRS notification under earlier of §6651(d)(2)(A)or (B). Penalty reduced to .25% per month whereinstallment agreement in effect.Reasonable cause(§301.6651-1(c)(1))and not due towillful neglect.§6651(f)Penalty for fraudulent failure tofile15% of tax due per month up to 75%None§6662(b)(1)and (c)Accuracy-related penalty—negligence or disregard of rulesor regulations20% of portion of underpayment attributable to negligenceor disregard of rules or regulations; position with reasonablebasis (20% standard) generally is not negligent; disregardpenalty that is properly disclosed for §§6011 and 6662purposes is not imposed if there is reasonable basis;disregard of a rule that is not subject to §6011 disclosure isnot imposed if there is realistic possibility of success (33%standard).Reasonable causeand taxpayer actedin good faith. See§1.6664-4§6662(b)(2)and (d)Accuracy-related penalty –substantial understatement ofincome tax20% of portion of underpayment due to substantialunderstatement; §6662(d)(1) penalty if understatementexceeds greater of 10% of amount of tax required to beshown on return or $5,000.In the case of any taxpayer who claims any deductionallowed under §199A for the taxable year, substitute “5percent” for “10 percent”.Reasonable causeand taxpayer actedin good faith. See§1.6664-4§6662(b)(7)and (j)Accuracy-related penalty – Anyundisclosed foreign financialasset understatement.40% of portion of understatement for such taxable yearwhich is attributable to any transaction involving anundisclosed foreign financial asset.Reasonable causeand taxpayer actedin good faith. See§1.6664-4§6663Civil fraud75% of underpayment attributable to fraud; if fraud shown,entire deficiency presumed fraudulentNone

Civil Penalty Matrix Explained

This chart organizes the most frequently encountered civil tax penalties into four columns: the Code section, a description of the prohibited conduct, the penalty rate and how it is computed, and the statutory defense a taxpayer may raise. It spans the delinquency penalties of § 6651, the accuracy-related penalties of § 6662, and the civil fraud penalty of § 6663.

The § 6651 delinquency penalties turn on filing and payment failures. Failure to file under § 6651(a)(1) runs 5% of the tax due per month, up to 25%; when a failure-to-pay penalty also applies for the same month, the failure-to-file rate is reduced to 4.5% per month (up to 22.5% over five months). Failure to pay under § 6651(a)(2) and (a)(3) accrues at .5% per month up to 25%, rising to 1% per month after IRS notification and dropping to .25% per month while an installment agreement is in effect. A fraudulent failure to file under § 6651(f) is far steeper — 15% per month up to 75%.

The § 6662 accuracy-related penalties are generally 20% of the underpayment attributable to negligence or disregard of rules (§ 6662(b)(1)) or to a substantial understatement of income tax (§ 6662(b)(2)), and 40% for an understatement attributable to an undisclosed foreign financial asset (§ 6662(b)(7)). The § 6663 civil fraud penalty is 75% of the underpayment attributable to fraud, and once fraud is shown the entire deficiency is presumed fraudulent.

The defenses track the statute: reasonable cause and the absence of willful neglect defeat the § 6651 delinquency penalties (Treas. Reg. § 301.6651-1(c)(1)), and reasonable cause coupled with good faith (Treas. Reg. § 1.6664-4) applies to the § 6662 accuracy penalties. No reasonable-cause defense is available for a § 6651(f) fraudulent failure to file or for the § 6663 civil fraud penalty.

Key Takeaways

Delinquency penalties stack — with a cap

When failure-to-file and failure-to-pay penalties overlap in the same month, the § 6651(a)(1) filing penalty drops from 5% to 4.5% per month, capped at 22.5% over five months.

Accuracy penalties are 20% — or 40%

Negligence and substantial understatements under § 6662 carry a 20% penalty, but an understatement tied to an undisclosed foreign financial asset under § 6662(b)(7) doubles to 40%.

Fraud carries the heaviest rate and a presumption

Civil fraud under § 6663 is 75% of the underpayment attributable to fraud, and once any fraud is shown the entire deficiency is presumed fraudulent.

Reasonable cause is the common defense — except for fraud

Reasonable cause and good faith (Treas. Reg. § 1.6664-4) or the absence of willful neglect (Treas. Reg. § 301.6651-1(c)(1)) defeat most penalties, but no such defense applies to § 6651(f) or § 6663 fraud.

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