What Happens If You File Taxes Late?

What happens if you file taxes late? It depends on whether you owe taxes or expect to get a refund on your federal tax return.

Knowing the answer to this question can help you avoid any difficulties with the Internal Revenue Service (IRS) this tax season.

5 Key Facts About Missing The Tax Filing Deadline

It’s important to start with the basics. Here are a few brief pieces of information about filing taxes late.

1. Under some circumstances, you might not be penalized for filing late.

2. Filing Form 4868 before the tax deadline can get you a 6-month extension.

3. Taxpayers who don’t qualify for an automatic extension or file Form 4868 might have to pay a penalty for filing late.

4. Penalties often require paying interest, and the interest rate varies depending on the type of penalty.

5. You can get an automatic filing extension by making a partial payment electronically or by phone.

When You Won’t Get Penalized For Filing Taxes Late

Under certain circumstances, you won’t be penalized for filing late. Here are a few examples:

• You don’t owe any taxes.
• You live in an area that the Federal Emergency Management Agency (FEMA) has designated as a federal disaster area as a result of a natural disaster or other emergency.
• You’re a U.S. resident or citizen living or working abroad on tax day, which means you get an automatic 2-month extension.
• You or your spouse are serving in a combat zone, which qualifies you for at least 180 more days to file.
• You filed Form 4868 by the tax deadline to get a 6-month extension.

The Penalty For Filing Taxes Late

U.S. taxpayers who didn’t get an extension or don’t have a valid reason for filing late will face IRS penalties. This is called a failure-to-file or delinquency penalty. According to the IRS website, late filers have to “pay a percentage of the taxes you didn’t pay on time.” 

Taxpayers who don’t file on time will receive an IRS notice. The penalty it assesses will be based on:

• How late the taxpayer filed their income tax return
• The amount the taxpayer owes in unpaid taxes on the original due date

The penalty will be 5% of the unpaid taxes for each month or partial month the return is filed late, up to 25% of the unpaid taxes. For those who file a federal income tax return more than 60 days after the deadline without an extension, the minimum penalty is $485.

Failure To File Vs. Failure To Pay

Simply put, failure to file means not filing a return by tax day. Failure to pay means not paying the amount owed. The penalties for the two are also slightly different.

The failure-to-pay penalty is 0.5% of the unpaid amount owed. Late payers must pay the penalty for each month or part of the month that the tax remains unpaid. Like the delinquency penalty, it’s capped at 25% of the amount the taxpayer owes.

If a taxpayer failed to file and failed to pay, the IRS may reduce the failure-to-pay penalty and apply the late payment penalty.

How To Avoid IRS Penalties For Late Tax Filing

There are a few ways to avoid IRS penalties for filing your taxes late.

Adjust Your Withholding To Get A Refund

If you don’t owe taxes, you won’t face a penalty for filing late. Tweaking your tax withholding to ensure you get a tax refund can help you avoid late filing penalties. Consider consulting a tax professional to guarantee that you withhold enough.

File Your Taxes On Time

Tax preparation is probably easier than it’s ever been. A generous standard deduction for taxpayers means fewer people will have to spend time itemizing. Tax software such as TurboTax and electronic tax forms also make filing taxes simpler.

File Form 4868 For An Automatic Tax Extension

Filing IRS Form 4868 is another way to avoid penalties if you expect to pay additional taxes. You’ll need to fill in some basic information, including how much you might owe and your personal information.

Pay All Or Some Of The Estimated Tax You Owe Electronically

If filers make partial tax payments electronically or by phone, the IRS will automatically process a filing extension. Electronic payment options include Direct Pay, PayPal, Venmo, Click to Pay, credit cards and several other methods.

What To Do If You Can’t Pay Your Taxes

One reason people might not file their taxes is because they have taxes due. But not filing because of tax debt isn’t a long-term solution. The IRS offers payment plans for individuals and businesses who are concerned about affording their tax bill. Here are the options for those interested in a payment plan:

• A long-term payment plan: The taxpayer has filed all required returns and owes less than $50,000 in combined tax, interest and penalties.
• A short-term payment plan: The taxpayer has filed all required returns and owes less than $100,000 in combined tax, interest and penalties.

Some payment agreements require setup fees ranging from $31 to $130, which may be waived for low-income tax filers.

The Bottom Line: You Can Work With The IRS To Avoid A Tax Penalty

The IRS understands that people may encounter challenges and circumstances that can make filing taxes before the deadline a challenge. With some prior planning, you can file the paperwork needed or make a partial payment to prevent penalties, interest and added stress.

Thinking about which deductions you should claim this year to reduce your taxes owed? Download the Rocket Money℠ app to start tracking expenses so you can reduce your tax liability.