Failure-to-Pay Penalty

Failure-to-Pay Penalty

Katelynn Minott, CPA & CEO profile picture
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The failure-to-pay penalty is an IRS penalty charged when tax is not paid by the payment deadline. For U.S. expats, it can apply even when the return is filed by the automatic June 15 expat deadline because federal income tax is still due by the regular April payment deadline.

Why it matters for U.S. expats

The expat filing extension gives taxpayers abroad more time to file, not more time to pay. If U.S. tax remains unpaid after the April deadline, penalties and interest can start adding up even if the return itself is filed on time. This often affects expats with self-employment income, investment income, rental income, foreign tax credit timing issues, or income that was not fully covered by withholding or estimated payments.

Common questions

1. When does the failure-to-pay penalty apply?

The penalty applies when tax is not paid by the due date. For most individual taxpayers, that means the regular April payment deadline.

2. How much is the failure-to-pay penalty?

The standard penalty is 0.5% of unpaid tax for each month or partial month the tax remains unpaid, up to 25%.

3. Does the June 15 expat extension delay the payment deadline?

No. The automatic June 15 expat extension gives qualifying taxpayers abroad more time to file, but tax is still due by the April deadline.

4. Is the failure-to-pay penalty different from the failure-to-file penalty?

Yes. The failure-to-pay penalty is for paying late. The failure-to-file penalty is for filing the return late and is usually more expensive.

5. What happens if both failure-to-file and failure-to-pay penalties apply?

When both penalties apply in the same month, the IRS reduces the failure-to-file penalty by the failure-to-pay penalty for that month.

6. Can a payment plan reduce the failure-to-pay penalty?

Yes. If an individual taxpayer filed on time and has an approved IRS payment plan, the penalty is reduced to 0.25% per month or partial month during the plan.

7. Can the failure-to-pay penalty increase?

Yes. If the IRS issues a notice of intent to levy and the tax is not paid within 10 days, the penalty can increase to 1% per month or partial month.

8. Does interest apply as well as the failure-to-pay penalty?

Yes. Interest is charged on unpaid tax and on penalties. Interest continues until the balance is paid in full.

9. Can the failure-to-pay penalty be removed?

Yes, if the taxpayer qualifies for penalty relief. The IRS may remove or reduce the penalty for reasonable cause, first-time penalty abatement, or another available relief route.

10. What should U.S. expats do if they cannot pay the full tax balance?

They should file the return on time, pay as much as possible, and consider an IRS payment plan. Filing on time helps reduce the risk of the larger failure-to-file penalty.

When to get help

Professional guidance is important when:

  • You filed on time but still owe U.S. tax.
  • You missed the April payment deadline while living abroad.
  • You owe tax after claiming the Foreign Tax Credit or Foreign Earned Income Exclusion.
  • You are self-employed and did not make enough estimated tax payments.
  • You received an IRS notice about late payment, penalties, or interest.
  • You need to request penalty relief or reasonable cause abatement.
  • You need an IRS payment plan or a strategy for unpaid back taxes.

Bright!Tax can review the balance due, identify penalty exposure, prepare late or amended filings if needed, and help request penalty relief where available. Get started with Bright!Tax.

Official sources

Reviewed by

Katelynn Minott, CPA & CEO

Last reviewed

July 2026

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