What to Do If You Miss the Tax Deadline

Missing the tax filing deadline can be stressful, but the situation is manageable. Taking immediate action is the best way to minimize financial repercussions. Procrastination will only complicate matters, so the first step is to begin the process of filing your late return as soon as possible.

Understanding the Penalties and Interest

When a tax return is not filed or paid on time, the Internal Revenue Service (IRS) assesses penalties and interest. The two primary penalties are for failing to file and for failing to pay, with the failure-to-file penalty being more severe. It is calculated as 5% of the unpaid taxes for each month a return is late, capped at 25% of your unpaid tax liability. If a return is filed more than 60 days after the due date, a minimum penalty applies, which for returns due in 2025 is the lesser of $510 or 100% of the tax owed.

A separate penalty exists for not paying taxes owed by the deadline. The failure-to-pay penalty is 0.5% of the unpaid taxes for each month the taxes remain unpaid, and this penalty is also capped at 25% of the unpaid tax amount. If both the failure-to-file and failure-to-pay penalties are applied in the same month, the failure-to-file penalty is reduced by the amount of the failure-to-pay penalty, making the combined penalty 5% for each month both apply.

Beyond these penalties, interest is charged on any underpayment of tax, including the original unpaid tax amount and any penalties assessed. Interest compounds daily, and the rate is determined quarterly, meaning it can change throughout the year.

If you are due a tax refund, there is no penalty for filing your return after the deadline. However, you must file the return within three years of its original due date to claim your refund. Failing to file within this three-year window means you forfeit your right to that money.

Filing Your Late Return A Step-by-Step Guide

The first step to resolving a missed tax deadline is to gather all necessary tax documents. This includes forms that report your income, such as W-2s from employers and 1099 forms for other income. You should also collect any records related to potential deductions and credits you may be eligible to claim.

If you are missing documents, first contact the issuer, such as your employer or financial institution, to request a copy. If you cannot obtain the forms this way, you can use the “Get Transcript” tool on the IRS website to access a free summary of your wage and income information. If a W-2 or 1099 cannot be obtained, you can use Form 4852, Substitute for Form W-2, to estimate your income and withholding based on your final pay stub.

Once you have your documents, you must complete your tax return using the forms for the specific year you are filing, as tax laws and forms change annually. You can find prior-year forms on the IRS website. Preparation options include using tax software with prior-year versions or hiring a tax professional for assistance.

After completing the return, the final step is to submit it. While tax professionals can electronically file returns for the current and two previous tax years, individuals preparing their own prior-year returns must print and mail them. You will need to find the correct IRS mailing address, which depends on your location and whether you are including a payment. These addresses are listed in the instructions for that year’s Form 1040. It is advisable to send the return via certified mail to have proof of the mailing date.

Addressing Your Tax Bill

After filing your late return, the next step is to address the amount of tax you owe. The most effective way to minimize the financial impact is to pay as much as you can as soon as possible, as payments reduce the principal on which penalties and interest are calculated.

For those who cannot pay the full amount immediately, the IRS offers a short-term payment plan. This option provides up to 180 additional days to pay the full balance. There are no setup fees for this plan, though penalties and interest will continue to accrue on the outstanding amount. You can apply for a short-term payment plan online through the IRS website’s Online Payment Agreement tool.

If you require more than 180 days, a long-term payment plan, also known as an Installment Agreement, is an option. These agreements allow you to make monthly payments for up to 72 months. To be eligible, you must owe a combined total of $50,000 or less in tax, penalties, and interest and have filed all required returns. You can apply using the Online Payment Agreement tool or by submitting Form 9465, Installment Agreement Request, but setup fees apply.

In cases of significant financial hardship, an Offer in Compromise (OIC) might be a possibility. An OIC allows certain taxpayers to resolve their tax debt with the IRS for a lower amount than what they originally owed. The IRS evaluates your ability to pay, income, expenses, and asset equity to determine eligibility. The OIC program has strict requirements, so the IRS provides an OIC Pre-Qualifier tool on its website to help you determine if you may be a candidate.

Requesting Penalty Relief

Once your late return is filed and you have a plan to address the tax liability, you may be able to request that the IRS remove, or abate, the penalties. One of the most common forms of relief is the First-Time Penalty Abatement. This is available to taxpayers who have a clean compliance history, meaning they filed and paid on time for the three tax years prior to the year the penalty was assessed and have not received a prior abatement. This relief can apply to the failure-to-file and failure-to-pay penalties.

Another basis for penalty relief is demonstrating “reasonable cause.” This means you can show that you exercised ordinary business care but were still unable to file or pay on time due to circumstances beyond your control. The IRS considers each case based on its unique facts. Valid reasons can include death or serious illness of the taxpayer or an immediate family member, a fire or other disaster that destroyed records, or an inability to obtain necessary records.

The process for requesting penalty relief often begins with a phone call to the IRS using the number on the notice you received. For a First-Time Abatement request, an agent may be able to grant the relief over the phone if you qualify. A request based on reasonable cause will likely need a more detailed explanation and supporting documentation.

If a written request is required, you should use Form 843, Claim for Refund and Request for Abatement. On this form, you will need to identify the penalty, the tax period, and provide a detailed explanation for requesting the abatement. It is important to attach copies of any supporting documents, such as hospital records, that substantiate your claim for reasonable cause. The completed form should be mailed to the IRS service center indicated in the form’s instructions.