What Happens If You Miss the Tax Deadline?

Missing a tax deadline is a common situation. Understanding the repercussions and steps to take can help manage it effectively. This article explains what happens when a tax deadline is missed and outlines steps for addressing late filings and unpaid tax liabilities.

Consequences of Missing the Deadline

When a tax return is not filed by the due date, including extensions, and tax is owed, the Internal Revenue Service (IRS) may impose penalties and interest. Two primary penalties apply: the failure-to-file penalty and the failure-to-pay penalty.

The failure-to-file penalty, outlined in Internal Revenue Code Section 6651, applies if you do not submit your tax return by the due date or extended due date. This penalty is 5% of the unpaid taxes for each month or part of a month the return is late, up to a maximum of 25% of your unpaid tax. For returns filed more than 60 days late, a minimum penalty applies, which is the lesser of $525 (for tax returns due in 2025) or 100% of the tax due.

The failure-to-pay penalty is assessed when you do not pay the tax owed by the original due date, even with an extension to file. This penalty is 0.5% of the unpaid taxes for each month or part of a month the tax remains unpaid, capped at 25% of your unpaid tax. Both failure-to-file and failure-to-pay penalties can apply simultaneously. In these cases, the failure-to-file penalty is reduced by the failure-to-pay penalty amount for any month they both apply, meaning the combined penalty rate is usually 5% per month.

Interest also accrues on any unpaid tax from the original due date until payment, as per Internal Revenue Code Section 6601. The interest rate is determined quarterly and is typically the federal short-term rate plus three percentage points, compounded daily. Interest charges cannot be waived unless the associated penalty is also removed. If no tax is owed, there is no failure-to-pay penalty or interest, but a failure-to-file penalty could still apply if a return was required.

Filing Your Late Tax Return

Filing your tax return promptly, even past the deadline, mitigates accumulating penalties. The failure-to-file penalty is higher than the failure-to-pay penalty, making timely filing a priority even if you cannot immediately pay the full tax owed. Filing stops the accrual of the failure-to-file penalty and demonstrates your intent to comply.

To prepare a late return, gather all necessary tax documents, such as W-2s, 1099s, and other income or deduction statements. These documents are essential for accurate income reporting and claiming eligible deductions or credits. You can prepare your late return using tax software or through a tax professional.

Once complete, submit your return. E-filing is the fastest and most secure method, though availability for prior-year returns may vary. If e-filing is not an option, print and mail a paper return to the appropriate IRS address. Use certified mail with a return receipt for paper submissions, providing proof of mailing and delivery.

Addressing Unpaid Tax Liabilities

After filing your late tax return, address any unpaid tax liabilities to prevent further interest and penalty accumulation. If you can pay the full amount, the IRS offers convenient methods like IRS Direct Pay for bank transfers, or payment by debit or credit card, though third-party processing fees may apply for card payments. You can also pay via electronic funds withdrawal, check, or money order.

If paying the entire amount at once is not feasible, the IRS provides payment arrangements. A short-term payment plan grants up to 180 additional days to pay your tax liability in full. While there is no fee, interest and penalties continue to accrue until the balance is paid.

For those needing more time, an installment agreement (Internal Revenue Code Section 6159) allows monthly payments for up to 72 months. Apply online through the IRS Online Payment Agreement tool, or by submitting Form 9465, Installment Agreement Request. Interest and penalties continue to accrue on the outstanding balance, but the failure-to-pay penalty rate may be reduced to 0.25% while the agreement is in effect.

In cases of significant financial hardship, an Offer in Compromise (OIC) (Internal Revenue Code Section 7122) is an option. An OIC allows taxpayers to resolve their tax liability with the IRS for a lower amount than owed. This option is reserved for situations where there is doubt as to collectibility, doubt as to liability, or when collection would cause economic hardship. The OIC application process is rigorous and requires detailed financial disclosures. Failure to make or adhere to payment arrangements can lead to IRS collection actions, including tax liens or levies.

Seeking Penalty Abatement

You can request a reduction or removal of penalties if you demonstrate a legitimate reason for non-compliance. The IRS may grant penalty abatement based on “reasonable cause” or specific relief programs.

Reasonable cause applies when you exercised ordinary business care and prudence but were unable to meet tax obligations due to circumstances beyond your control.

Examples of reasonable cause include natural disasters, serious illness, death in the immediate family, or inability to obtain necessary records. However, reasons like forgetfulness, reliance on a third party who failed to perform, or lack of funds without other mitigating factors are not considered reasonable cause. Supporting documentation is needed to substantiate your claim.

The First-Time Abate (FTA) waiver is another avenue for penalty relief. This waiver is available for failure-to-file, failure-to-pay, and failure-to-deposit penalties. To qualify, you must have a clean compliance history for the three prior tax years (no penalties), and you must have filed all required returns or a valid extension. You must also have paid or arranged to pay any tax due.

Request penalty abatement by calling the IRS, writing a letter explaining your situation, or by filing Form 843, Claim for Refund and Request for Abatement. When submitting your request, clearly state the reason for the late filing or payment and provide supporting documentation. If your request for abatement is denied, you generally have the right to appeal the decision.