TC 276: Systemic Failure to Pay Penalty

What the code actually does

TC 276 is the failure-to-pay penalty, assessed automatically. IRM 20.1.2.2.5 records it in the chapter’s own list of systemic transactions: "TC 276/277—systemic assessment/abatement of the penalty for failure to pay."

IRS Document 6209, Section 8A (the IRS’s reference guide to its data-processing codes) describes the trigger as a "computer-generated FTP Penalty assessed if return liability and/or Examination/DP Adjustment is not paid on or before date prescribed for payment." Note that it reaches both kinds of liability: the tax a taxpayer reported and did not pay, and tax added later by an adjustment or an examination.

Two penalty bases and a rate escalator

IRM 20.1.1’s penalty transaction code exhibit sets out separate statutory bases under the same code family, and they run on different clocks.

The first is failure to pay tax shown on a return, under IRC §6651(a)(2): the penalty rate is 0.5% (.005) per month, "for each month or part of a month, from the due date of the return to the date the tax is paid or the maximum of 25% of the unpaid tax is reached." That clock starts at the original due date.

The second is failure to pay tax required to be shown, under IRC 6651(a)(3) — the same half-percent rate, but running, in the words of IRM Exhibit 20.1.1-3, "from 21 calendar days (10 business days for amounts of $100,000 or more) of the date of notice and demand until the tax is paid." A client assessed additional tax two years after filing does not face this penalty from the original due date.

The third is not a separate penalty but an escalation, and it is the one worth watching. IRC 6651(d) increases the FTP penalty from 0.5% (.005) to 1% (.01) per month from, in the words of IRM Exhibit 20.1.1-3, "the earlier of the day on which notice and demand for immediate payment is given or 10 days after the IRS has issued the notice of intent to levy."

The rate doubles ten days after the levy notice

The escalation is the practical reason to care about this code’s dates rather than just its amount. The rate doubles for each month that begins after the tenth day following a notice of intent to levy (IRC §6651(d)(2)(A)) — and the trigger is the notice, not the levy. A jeopardy demand for immediate payment under the last sentence of IRC §6331(a) starts the higher rate for each month that begins after the day the IRS makes it (IRC §6651(d)(2)(B)); an ordinary balance-due notice does not. Nothing has to be seized for the client’s cost of delay to double.

That makes the levy notice a deadline in a financial sense as well as a procedural one. A client weighing whether to borrow to pay is facing a materially different calculation before and after it, and the earliest notice of intent to levy (CP504, LT11 or Letter 1058) starts the ten-day clock of IRC §6651(d)(2)(A).

The twenty-five percent ceiling still applies, which is worth saying to a client who fears indefinite growth: this penalty stops, even though the interest underneath it does not.

The rate also moves in the client’s favor in one situation worth knowing: while an installment agreement is in effect on an individual return filed on time, the rate is halved rather than doubled. So the same liability can carry three different monthly rates over its life depending entirely on what the client did and what the Service sent, which is why a penalty figure quoted without dates cannot be checked.

What people mistake TC 276 for

People confuse it with TC 270, the manual assessment of the same penalty. The distinction is origin, and it matters for what has already been considered: a manual assessment came from someone working the case, while this one came from the system on a schedule with nobody weighing the client’s circumstances.

Its abatements are confused with each other in the same way the failure-to-file family’s are, and the asymmetry is the same. TC 271 is the manual abatement and reaches both the manual assessment and this systemic one; TC 277 is the systemic abatement and reaches only this one. So a granted relief request posts as the manual code even when the penalty removed was assessed automatically.

And people confuse it with the failure-to-file penalty, which is a different penalty at a much higher rate for a different failure. Filing late and paying late are separate defaults; where both apply in the same month the filing penalty is reduced by this one rather than the two running at full rate together. Sorting out which penalties are actually on a module (the record for one tax type and period), and which relief path reaches each, is what the Penalty Abatement Analyzer is built to do.

What to do next

Establish which of the two statutory bases applies and whether the escalator has started, because the start date can differ by years between them.

Find the date of the earliest notice of intent to levy, since under IRC §6651(d) the rate doubles for each month that begins more than ten days after it.

Check how close the penalty is to its twenty-five percent ceiling before advising on urgency.

Treat the systemic origin as evidence that no relief request has been considered, not that one was refused.

Expect a successful request to post as the manual abatement rather than as the systemic one.

On a 2025 or later tax-year return or a 2026 or later quarterly return of a form listed in IRM Procedural Update SBSE-20-0626-0643, check for Automatic Exemption from Penalty (AEP) before you request relief: an unreversed TC 971 action code 996 on the return’s own module shows that the IRS already granted AEP or a prior First-Time Abate there, and the IRS grants AEP when, among other conditions, an unreversed action code 995 sits on each of the prior three years’ modules (12 consecutive quarters for quarterly returns) and the taxpayer filed the return within three years of its original due date, but not when an unreversed 996 sits on any of those modules.