The law provides a penalty of 5% of the tax due for each month, or part of a month, for which a return isn't filed up to a maximum of 25% of the tax due (15% for each month, or part of a month, up to a maximum of 75% if the failure to file is fraudulent). If the return is more than 60 days late, the minimum penalty is the smaller of $510 the amount shown in the table below or the tax due.

The penalty won't be imposed if the taxpayer can show that the failure to file on time was due to reasonable cause. If a notice about penalty and interest is received after filing the return, send the IRS an explanation and they will determine if the reasonable-cause criteria has been met. Don't attach an explanation to the Form 1041.

Generally, the penalty for not paying tax when due is 1/2 of 1% of the unpaid amount for each month or part of a month it remains unpaid. The maximum penalty is 25% of the unpaid amount. The penalty applies to any unpaid tax on the return. Any penalty is in addition to interest charges on late payments. If interest on either of these penalties is included with payment, identify and enter these amounts in the bottom margin of Form 1041, page 1. Don't include the interest or penalty amount in the balance of tax due on line 28. 

For each failure to provide Schedule K-1 to a beneficiary when due and each failure to include on Schedule K-1 all the information required to be shown (or the inclusion of incorrect information), a $330 (2025) penalty may be imposed with regard to each Schedule K-1 for which a failure occurs.

Schedule K-1 (Form 1041), must be provided on or before the day required to file Form 1041, to each beneficiary who receives a distribution of property or an allocation of an item of the estate. 

The maximum penalty is $3,987,000 for all such failures during a calendar year 2025. If the requirement to report information is intentionally disregarded, each $330 penalty is increased to $660 or, if greater, 10% of the aggregate number of items required to be reported, and no maximum penalty applies. The penalty won't be imposed if the fiduciary can show that not providing information timely and correctly was due to reasonable cause and not due to willful neglect.

If the fiduciary underpaid estimated tax, use Form 2210, Underpayment of Estimated Tax by Individuals, Estates, and Trusts, to figure any penalty. Enter the amount of any penalty on Form 1041, line 27. 

This penalty may apply if certain excise, income, social security, and Medicare taxes that must be collected or withheld aren't collected or withheld, or these taxes aren't paid. These taxes are generally reported on Forms 720, 941, 943, 944, or 945. The trust fund recovery penalty may be imposed on all persons who are determined by the IRS to have been responsible for collecting, accounting for, or paying over these taxes, and who acted willfully in not doing so. The penalty is equal to the unpaid trust fund tax. See the Instructions for Form 720; or Pub. 15 (Circular E), Employer's Tax Guide, for more details, including the definition of responsible persons. Other penalties can be imposed for negligence, substantial understatement of tax, and fraud.