IRS Penalty Projection Calculator

IRS interest compounds daily per IRC § 6622. This means each day your unpaid balance grows, and the next day you pay interest on the new higher balance. For a $10,000 debt at 7% annual rate, you pay about $1.92 per day in interest, and that compounds. Over a year, daily compounding adds approximately 0.25% more than simple annual interest.

For Q4 2026, the IRS underpayment rate is 7% for individuals and regular corporations (federal short-term rate + 3%), per Rev. Rul. 2026-15, IRB 2026-36. Large corporate underpayments over $100,000 pay 9% (federal short-term rate + 5%). These rates are set quarterly and can change. Our calculator uses the latest published IRS rates.

Our break-even analysis helps you decide. We calculate how much your debt will grow if you wait vs. the savings from investing that money elsewhere. Generally, if you can earn more than the IRS interest rate (currently 7% for Q4 2026), waiting might make sense mathematically. However, this ignores collection risk, credit impacts, and peace of mind from being debt-free.

No, the Failure to Pay (FTP) penalty has a maximum of 25% of the unpaid tax. At 0.5% per month, it takes 50 months (about 4.2 years) to reach the maximum. After that, only interest continues to accrue. However, if you enter an installment agreement, the FTP rate drops to 0.25% per month.

The Failure to File (FTF) penalty is 5% per month, but maxes out at 25% after 5 months of being late. If both FTF and FTP apply for the same month, FTP is reduced by the FTF amount (so you don't pay double). Our projection calculator includes these maximums in its calculations.

Our scenario comparison feature shows three projections side-by-side: optimistic (rates decrease by 1%), current (rates stay the same), and pessimistic (rates increase by 1%). This helps you understand best-case, expected, and worst-case outcomes for your tax debt over time.

The Collection Statute Expiration Date (CSED) is typically 10 years from assessment. After that, the IRS can no longer legally collect the debt. Our projection calculator shows when your CSED would occur and the total debt at that point. Note: certain events like bankruptcy, OIC, or CDP hearings can extend the CSED.

Penalties have maximums (25% for FTF, 25% for FTP), but interest has no maximum. Once your penalties cap out, only interest continues accruing. For long-term debts, interest often exceeds the original penalties. Our month-by-month breakdown shows exactly when each component caps out.