The information in this article is up to date for tax year 2024 (returns filed in 2025).
The April 15th tax deadline will be here before you know it. If you haven’t filed your taxes yet, there is still time. But what happens if you miss the due date and file taxes late?
If you’re under 65 and earned less than $14,600 (for single filers) or $29,200 (for married couples filing jointly) in 2024, you aren’t required to file a tax return and won’t be penalized. However, if you don’t file, you may miss your chance to receive a tax refund.
On the flip side, taxpayers who owe the IRS and miss the deadline will face two penalties. One penalty for filing your taxes late and another for paying your taxes late. You’ll also accumulate interest until your balance is paid in full.
Here’s what you need to know about what you may owe and how to avoid or reduce the penalties for filing your taxes late.
Failure-to-pay penalty
Most Americans can’t afford to cover a surprise expense with their savings. So, if you receive an unexpected tax bill and are unable to pay your full balance by the deadline, you’re not alone. But if you don’t file for an extension ahead of time, you’ll be charged a failure-to-pay penalty and a late payment penalty.
The penalty is 0.5% of your unpaid taxes for each month the payment is late, up to a maximum of 25%.
The IRS will notify you if you owe any late penalties on top of your tax bill. If you can’t pay your taxes, the IRS does offer a payment plan so you can pay off your balance over time.
Failure-to-file penalty
Sometimes when people know they’re going to owe money, they put off filing until they can come up with the extra cash. This is a costly mistake. The penalty for filing your taxes late is much higher than the penalty for not paying on time.
The penalty is 5% of your unpaid taxes each month it’s late, up to a maximum of 25%.
Once your return is more than 60 days late, your minimum penalty becomes $510 or 100% of your owed taxes, whichever is less. Even if you can’t afford to pay your balance, always file on time, and pay as much as you can. Avoid late filing penalties—file your taxes now with ezTaxReturn!
Interest
Your unpaid tax debt starts accumulating interest the minute you miss the tax deadline, and late payments build daily. It only stops once your balance is paid in full. The interest rate is the federal short-term rate plus 3 percent.
Consequences of Not Filing Taxes
Filing your taxes late or not filing at all can lead to severe consequences, including hefty penalties, accumulating interest, and even potential criminal charges. If you don’t file your tax return, the IRS may step in and file a substitute return on your behalf. This substitute return is often less favorable and can result in a higher tax bill than if you had filed yourself.
Moreover, if you don’t file your tax return within three years, you risk forfeiting any tax refund you might be entitled to. The IRS will also charge interest on any amount you owe, which starts accruing from the tax deadline and can add up quickly, making it even more challenging to pay your tax bill.
The tax deadline is typically April 15th each year. Missing this deadline means you could face late filing penalties and interest, which can significantly increase your total tax liability. To avoid these consequences, it’s crucial to file your income tax return on time, even if you can’t pay the full amount you owe. Stay ahead of the deadline—file now!
Waiver of Penalty and Interest
In certain situations, the IRS may waive penalties and interest if you can demonstrate reasonable cause for filing or paying your taxes late. This process, known as penalty abatement, can provide significant relief if you qualify. To request a waiver, you’ll need to write to the IRS office that sent you the notice or bill, explaining the circumstances that prevented you from meeting your tax obligations. Be sure to include any supporting documentation, such as medical records or proof of financial hardship.
The IRS considers waiving late penalties and interest if you can show that you made a good faith effort to comply with tax laws but were unable to do so due to circumstances beyond your control. Examples of such situations include serious illness, death, destruction of records, or other unusual circumstances. Demonstrating reasonable cause can help you avoid additional financial strain from penalties and interest.
Resolving Tax Penalties and Interest
If you’ve received a notice or bill from the IRS, it’s essential to address the issue promptly to avoid further penalties and interest. Start by carefully reviewing the notice to ensure all information is accurate. If you find any errors, write to the IRS office that sent the notice, explaining the mistake and providing any necessary supporting documentation.
If you’re unable to pay your tax bill in full, consider setting up an installment agreement with the IRS. This allows you to make monthly payments towards your tax liability, easing the financial burden. You can apply for an installment agreement online or by mail using Form 9465.
In some cases, you might be eligible for an offer in compromise, which lets you settle your tax debt for less than the full amount owed. To qualify, you’ll need to demonstrate that paying the full amount would cause significant financial hardship. You can apply for an offer in compromise using Form 656.
Addressing tax penalties and interest promptly is crucial to avoid additional charges and potential legal action. If you’re unsure about how to resolve your tax penalties and interest, consider consulting a tax professional or seeking guidance directly from the IRS.
Four ways to avoid late tax filing penalties
1. File for a tax extension
If you need more time to prepare your return, you can apply for an extension to file. A tax extension will save you from paying penalties for late tax filing. You must apply for the extension by April 15th (the normal tax filing deadline).
Keep in mind, a filing extension does not extend your time to pay the actual taxes owed. If you owe tax, you are still required to pay by the April 15th tax deadline. If you need more time to pay, you can apply for a payment plan separately.
2. Apply for a payment plan
If you can’t pay the full amount of your tax bill on time, pay what you can now and then you can apply for a payment plan to pay off your balance over time. Depending on your tax situation, you may qualify for a long-term or short-term payment plan:
- Long-term payment plan (installment agreement): You owe $50,000 or less in combined tax, penalties and interest, and filed all required returns.
- Short-term payment plan: You owe less than $100,000 in combined tax, penalties and interest.
Keep in mind that interest and some late payment penalties may continue to be added to the amount you owe until the balance is paid in full.
3. Request penalty relief
In some cases, you may be eligible for penalty relief (either reduced or removed penalties). If you can show you acted in good faith to meet the deadline but were unable to due to extenuating circumstances, the IRS may forgive the penalty. It is crucial to pay taxes on time to avoid late penalties.
You’ll need to demonstrate reasonable cause such as:
- Death or serious illness of the taxpayer or immediate family
- Inability to get records
- Natural disaster
- System issues that delayed a timely submission
You can call the toll-free number at the top right corner of your IRS notice to request penalty relief for reasonable cause. Make sure you have supporting documentation on hand. You can also request relief in writing using IRS Form 843. If you don’t qualify for relief under reasonable cause, you may qualify for relief by administrative waiver if it’s your first tax penalty.
4. File now to reduce late penalties and interest
If you still need to do your taxes, file as soon as you can to minimize late penalties and interest on the tax owed. E-filing is faster, easier and less stressful than filing by paper. Using tax software like ezTaxReturn reduces the risk of making a mistake because the program walks you through the entire process and does the calculations for you. Most people can prepare and e-file their federal returns in as little as 30 minutes.
The articles and content published on this blog are provided for informational purposes only. The information presented is not intended to be, and should not be taken as, legal, financial, or professional advice. Readers are advised to seek appropriate professional guidance and conduct their own due diligence before making any decisions based on the information provided.
