What to Do If You Missed the Tax Deadline

Missing a tax deadline can feel overwhelming, but clear procedures exist to address such situations. The primary goal after a missed deadline is to file your tax return and pay any taxes owed as promptly as possible. Taking swift action can help minimize potential financial consequences. While tax deadlines are fixed, the tax authority provides pathways for individuals who find themselves in this circumstance. This guidance aims to clarify the steps involved in resolving a late tax filing.

Understanding Penalties and Interest

Failing to meet tax obligations by the deadline can result in financial penalties and interest charges. Two primary penalties apply: the “Failure to File” penalty and the “Failure to Pay” penalty.

The Failure to File penalty is assessed at 5% of the unpaid taxes for each month or part of a month a return is late, with a maximum of 25% of the unpaid tax. This penalty is higher than the Failure to Pay penalty, highlighting the importance of filing a return even if you cannot pay the full amount due.

The Failure to Pay penalty is 0.5% of the unpaid taxes for each month or part of a month that the tax remains unpaid. This penalty also has a maximum cap of 25% of the unpaid tax. If both penalties apply in the same month, the Failure to File penalty is reduced by the amount of the Failure to Pay penalty, meaning the combined penalty for that month will not exceed 5%. For returns more than 60 days late, a minimum Failure to File penalty may apply, which is the lesser of $435 (for returns due in 2022 and later) or 100% of the tax owed.

In addition to penalties, interest accrues on any unpaid taxes from the original due date until the payment date. The interest rate is determined quarterly and is the federal short-term rate plus 3 percentage points, compounded daily. This interest applies even if you filed an extension to file, as an extension to file is not an extension to pay. While interest cannot be waived, penalties may be abated if you can demonstrate reasonable cause for the delay.

Steps to File Your Late Return

To address a late tax return, obtain the correct tax forms for the specific tax year. These forms are available on the tax authority’s website and must correspond to the year you are filing.

If you are missing necessary documents such as W-2s or 1099s, you can request a tax transcript from the tax authority. This transcript provides information the tax authority has on file, which can assist in preparing your return. You can request transcripts for the last ten tax years.

Once your return is prepared, the submission method depends on the tax year. While current year returns can be e-filed, prior year returns require paper filing by mail.

Some tax software providers may offer the ability to prepare and even e-file prior year returns for recent tax years, but this capability is limited. For older tax years, you will need to print the completed forms and mail them to the appropriate address. Use a mailing service that provides proof of mailing and delivery for your records.

Paying Your Tax Liability

Once your tax return is prepared and you have determined any tax liability, make the payment. Paying your tax liability is separate from filing your return, though they are often completed concurrently. Various methods are available.

Electronic payment options are the most convenient. These include direct pay from a checking or savings account, which allows you to schedule payments up to 365 days in advance. You can also pay using a credit card, debit card, or digital wallet through third-party payment processors, though these options involve processing fees. Some tax software also allows you to schedule a payment when e-filing your return.

If you prefer to pay by mail, you can send a check or money order. Make the payment payable to the “United States Treasury” and include your name, address, taxpayer identification number, tax year, and relevant form or notice number. Do not send cash through the mail. Ensure the payment is correctly attributed to the specific tax year to avoid misapplication of funds.

What to Do If You Cannot Pay

If you owe taxes but are unable to pay the full amount immediately, communicate with the tax authority rather than ignoring the debt. Several options are available for taxpayers facing financial hardship.

One common option is to apply for an installment agreement, which allows you to make monthly payments over a period, up to 72 months. An installment agreement can be set up online, by phone, or by mail. If you owe less than $50,000 in combined tax, penalties, and interest, you may qualify for a streamlined installment agreement.

Another option is an Offer in Compromise (OIC), which allows certain taxpayers to settle their tax debt for less than the full amount owed. An OIC is considered when there is doubt about the tax authority’s ability to collect the full amount, or if requiring full payment would cause significant economic hardship. Eligibility for an OIC requires meeting specific criteria, such as having filed all required tax returns and made all estimated tax payments. The tax authority evaluates your ability to pay based on your income, expenses, and asset equity.

For short-term financial difficulties, you may be able to request a temporary delay in collection, sometimes referred to as “currently not collectible” status. This option is available if the tax authority determines that collecting the tax would create an undue financial hardship. While collection efforts may be paused, interest and penalties continue to accrue on the unpaid balance. To qualify for a temporary delay, you may need to provide detailed financial information.