What is the penalty for failing to file a tax return?

The penalty for failing to file a tax return is indeed a percentage of the taxes due for each month the return is late. This effectively means that the longer an individual waits to file their return after the due date, the more the penalty accrues. Specifically, the IRS typically assesses a penalty of 5% of the unpaid taxes for each month or part of a month that the return is late, up to a maximum of 25%.

This structure encourages timely filing, as the penalty compounds over time, making it particularly important for taxpayers to submit their returns as promptly as possible to minimize the financial impact. Understanding this penalty is essential for effective tax planning and compliance, highlighting the importance of awareness regarding deadlines and filing requirements.