How Does the IRS Calculate Tax Penalty?

The Internal Revenue Service generally calculates tax penalty at 5 percent of the unpaid taxes for each part of a month or for the entire month a tax return is late, explains the IRS. The penalty starts to accrue the day after the tax filing due date.

The total amount due in penalties does not exceed 25 percent of the unpaid taxes, explains the IRS. If a taxpayer does not pay his taxes by the deadline, he normally faces a failure-to-pay penalty of 1/2 to 1 percent of his unpaid taxes.

If a taxpayer requests an extension of time to file his individual income tax return and paid at least 90 percent of the taxes he owes when he files his request, he may not face a failure-to-pay penalty. Any remaining balance must be paid by the extended due date. If the 5 percent failure-to-file penalty and the 1/2 percent failure-to-pay apply in any month, the maximum penalty for both is 5 percent, explains the IRS.

If a taxpayer files his return more than 60 days after the due date, the minimum penalty is the smaller amount of 100 percent of the unpaid tax or $135, as of 2015. A taxpayer may not have to pay a late payment fee or filing fee if he can show reasonable cause for not filing his taxes on time, says the IRS.