Many taxpayers miss the annual tax filing deadline. This could be due to procrastination, unforeseen circumstances, or confusion about tax obligations. Regardless, filing taxes late can lead to significant penalties and interest charges that compound over time.
How can you prepare? In reality, proper tax preparation can help you avoid these issues by ensuring you have the necessary information and time to file accurately and on time.
In this blog, our team at Lewis.cpa explains what happens if you miss the tax deadline, the potential financial consequences, and the steps you should take to minimize penalties and get back on track with the Internal Revenue Service (IRS).
Understanding the Tax Filing Deadline
The standard deadline for filing federal income tax returns is typically April 15 each year. However, this date may be adjusted if it falls on a weekend or holiday. For the 2025 tax year, Tax Day remains April 15, 2025, for most taxpayers.
It's important to note that the IRS distinguishes between two different obligations:
- Filing your tax return (submitting the necessary forms)
- Paying any taxes owed (sending money to cover your tax liability)
Each of these obligations carries separate penalties if it’s not fulfilled on time.
What Happens If I Miss the Tax Deadline?
The consequences of missing the tax filing deadline depend largely on your situation:
If You're Due a Tax Refund
If the IRS owes you money, there's generally no penalty for filing late. However, you should still file as soon as possible. Here’s why:
- The IRS won't issue your refund until you file.
- You have only three years from the original due date to claim your refund.
- After the three-year window closes (April 15, 2028, for 2024 tax returns), you forfeit your refund altogether.
If You Owe Taxes
If you owe taxes and don't file on time, the IRS implements two types of penalties:
- Failure-to-file penalty: For not submitting your tax return by the deadline.
- Failure-to-pay penalty: For not paying your tax liability by the deadline.
You can expect expenses to rise, as the IRS charges interest on the unpaid tax amount and any penalties assessed.
What Are the IRS Penalties for Late Filing?
Let's explore the penalties the IRS can levy — what's the cost of filing late?
Failure-to-File Penalty
The failure-to-file penalty is significantly more severe than the failure-to-pay penalty:
- The penalty equals 5 percent of unpaid taxes for each month or part of a month your return is late.
- The penalty caps at 25 percent of your unpaid taxes.
- If your return is more than 60 days late, the minimum penalty is either $510 (for 2025) or 100 percent of the tax owed, whichever is less.
- The penalty begins accruing the day after the tax filing due date.
Failure-to-Pay Penalty
Even if you file on time but don't pay the full amount owed, you'll face a failure-to-pay penalty:
- The standard rate is 0.5 percent of unpaid taxes for each month or part of a month you're late.
- The penalty increases to 1 percent per month if you don't pay within 10 days of receiving an IRS notice about intent to levy.
- This penalty also caps at 25 percent of your unpaid taxes.
- If you file on time and set up an approved payment plan, the rate drops to 0.25 percent per month.
Combined Penalties
If both penalties apply in the same month, here’s what you can expect:
- The failure-to-file penalty is reduced to 4.5 percent (instead of 5 percent).
- The failure-to-pay penalty remains at 0.5 percent.
- The total combined monthly penalty becomes 5 percent.
Interest Charges
On top of penalties, the IRS charges interest on the unpaid tax balance:
- Interest compounds daily and continues accruing until your balance is paid in full.
- The interest rate equals the federal short-term rate plus 3 percent.
- The rate is determined quarterly and can change (currently 7 percent for early 2025).
- Unlike penalties, interest charges generally cannot be waived or abated.
Steps to Take If You've Missed the Filing Deadline
Don’t panic! Even if you've missed the deadline, there are actions you can take to address the situation and potentially reduce penalties. If you're unsure about the best course of action, lean on our experts at Lewis.cpa. We can provide expert guidance tailored to your specific circumstances.
1. File Your Return as Soon as Possible
The most important step is to file your return immediately, even if you can't pay the full amount you owe. This stops the failure-to-file penalty from growing, which accrues at a much higher rate than the failure-to-pay penalty.
2. Pay as Much as You Can
Even if you can't pay the entire tax bill, pay as much as possible when you file. This reduces the amount subject to failure-to-pay penalties and interest. Every dollar you pay now saves you money on future penalties and interest.
3. Request a Payment Plan
Not everyone can pay their tax liability in full. In this case, the IRS offers several payment options:
- Short-term payment plan: For amounts less than $100,000 that you can pay within 180 days.
- Long-term payment plan (Installment Agreement): For larger amounts or longer payment periods.
- Temporarily delay collection: If you're facing financial hardship.
Here are some benefits of setting up a payment plan:
- Reduces the failure-to-pay penalty from 0.5 percent to 0.25 percent per month.
- Prevents the IRS from taking more serious collection actions.
- Allows you to pay your tax debt in manageable installments.
4. Apply for Penalty Abatement
The IRS may waive penalties (but not interest) in certain situations:
- First-time penalty abatement: If you have a clean compliance history for the previous three years.
- Reasonable cause: If you can demonstrate that you failed to file or pay on time due to circumstances beyond your control, such as:
- Natural disasters
- Serious illness or death in the family
- Unavoidable absence
- Fire, casualty, or other disturbances
- Inability to obtain necessary records
5. Consider Filing for an Extension Next Time
To avoid future late filing penalties, remember that you can request an automatic six-month extension by filing Form 4868 by the original due date. Remember that this extends your filing deadline (usually to October 15) but not your payment deadline. You still need to estimate and pay any taxes owed by the original due date to avoid failure-to-pay penalties and interest.
Special Situations That May Provide Relief
Certain circumstances might qualify you for automatic deadline extensions or penalty relief:
Natural Disasters
The IRS often provides tax relief for victims in federally declared disaster areas, including:
- Extended filing and payment deadlines
- Waived penalties for affected taxpayers
- Special provisions for casualty losses
Military Service
Active duty military personnel serving in combat zones receive automatic extensions for filing and paying taxes:
- The extension lasts for the duration of service plus 180 days.
- It applies to filing, payment, and other tax-related actions.
U.S. Citizens Living Abroad
U.S. citizens living outside the country receive an automatic two-month extension (until June 15) to file their tax returns. However, interest still accrues on any unpaid tax from the original April 15 deadline.
Resolve Your Tax Challenges with Lewis.cpa
We know that facing tax issues can be intimidating, but the worst approach is to avoid them altogether. The penalties and interest for late filing and payment continue to grow until you address them head on, which potentially turns a manageable tax situation into a significant financial burden.
Don't let tax issues linger or go unnoticed. This is where working with a team like Lewis CPA can help. Contact us today to take the first step toward tax compliance and peace of mind.
