IRS Penalties for Filing Late as a Sole Proprietor (Schedule C / Form 1040)

A sole proprietor's business income is reported on Schedule C as part of the individual tax return, Form 1040, so the regular individual late-filing rules apply for late filing penalties. 

• If you file late and owe tax, the IRS typically charges a failure-to-file penalty of 5% of the unpaid tax per month (or part of a month), up to a maximum of 25%. 
• If the return is more than 60 days late, a minimum penalty may apply, which is generally the lesser of $525 (for returns required to be filed in 2026) or 100% of the unpaid tax. 
• In addition, if you pay late, the IRS may also charge a failure-to-pay penalty of 0.5% of the unpaid tax per month, up to 25%, and interest accrues on any unpaid balance until it’s fully paid.