What Happens If You Miss the Tax Filing Deadline?

Meeting tax filing deadlines is a responsibility. Missing these deadlines, whether for filing a return or paying taxes owed, can lead to complications. The Internal Revenue Service (IRS) imposes penalties when taxpayers miss their obligations. This article outlines these consequences and provides guidance on navigating a missed deadline.

Consequences of Late Filing

Failing to file a tax return by the due date can result in a “Failure to File” penalty, as outlined in Internal Revenue Code Section 6651. This penalty is generally calculated as 5% of the unpaid taxes for each month, or part of a month, that the return is late. The penalty continues to accrue until it reaches a maximum of 25% of your unpaid taxes, typically after five months.

For returns filed more than 60 days past the due date, a minimum penalty applies. This minimum is the lesser of $510 (for tax returns required to be filed in 2025) or 100% of the tax owed. It is important to note that this penalty generally does not apply if a tax refund is due, as there are no unpaid taxes for the penalty to be based on. The failure-to-file penalty is typically more substantial than the penalty for late payment, emphasizing the importance of submitting a return even if payment cannot be made.

Consequences of Late Payment

When taxes owed are not paid by the due date, a “Failure to Pay” penalty is assessed under Internal Revenue Code Section 6651. This penalty amounts to 0.5% of the unpaid taxes for each month, or part of a month, that the tax remains unpaid. The maximum penalty for failure to pay is 25% of the unpaid taxes.

The rate of this penalty can increase to 1% per month if the tax remains unpaid 10 days after the IRS issues a notice of intent to levy property. If both the failure-to-file and failure-to-pay penalties apply in the same month, the failure-to-file penalty is reduced by the amount of the failure-to-pay penalty. This coordination results in a combined penalty of 5% per month, typically comprising 4.5% for late filing and 0.5% for late payment. While the failure-to-file penalty caps after five months, the failure-to-pay penalty continues to accrue until the tax is paid, up to its 25% maximum, leading to a potential combined maximum penalty of 47.5% of the unpaid tax.

Understanding Interest Charges

Beyond penalties, interest is also charged on underpaid taxes, accruing from the original due date until the date of payment. This interest applies to the unpaid tax balance and any accrued penalties. The interest is compounded daily, meaning that interest is calculated on the previous day’s balance, which includes both the principal and any accumulated interest.

The IRS sets these interest rates quarterly, basing them on the federal short-term rate plus three percentage points for individuals and most corporations. For the first half of 2025, the interest rate for individual underpayments is 7%. Unlike penalties, interest cannot be waived, even if there was a reasonable cause for late filing or payment, as it represents the cost of using the government’s money.

Steps to Take After Missing the Deadline

If a tax filing deadline has been missed, taking immediate action is important to minimize potential penalties. The first step is to file the tax return as soon as possible, even if the full amount of tax owed cannot be paid at that time. Filing promptly helps reduce the failure-to-file penalty, which is typically more severe than the failure-to-pay penalty.

Taxpayers can prepare and submit their late return using tax software, through a tax professional, or by obtaining the necessary forms directly from the IRS. It is important to accurately calculate any tax liability, including any penalties and interest that may have already accrued. If a refund is due, the taxpayer typically has three years from the original due date to claim the refund before it is forfeited.

Options for Paying What You Owe

For taxpayers who owe money but cannot pay their tax liability in full, the IRS offers several payment relief options. An Installment Agreement allows taxpayers to make monthly payments over a period, typically up to 60 or 72 months. Taxpayers can apply for an installment agreement online or by submitting Form 9465.

Another option is an Offer in Compromise (OIC), which allows certain taxpayers to resolve their tax liability with the IRS for a lower amount than what is owed. An OIC may be considered if there is doubt as to collectibility, doubt as to liability, or if collecting the full amount would cause economic hardship. Finally, for those experiencing significant financial hardship, the IRS may temporarily delay collection efforts by classifying the account as “currently not collectible.” While this temporarily pauses active collection, penalties and interest continue to accrue during this period, and the debt is not forgiven. The IRS may request financial information to determine eligibility for such relief.