What Happens if You File Taxes Late? Tax-Filing Answers
Knowing what happens if you file taxes late can help you better prepare for tax-filing season. Filing and paying late could result in you being charged penalties.
Contributing Writer at Tally
March 2, 2022
Practicing good financial management is a year-round job. You may constantly be thinking about things like managing credit card debt, making on-time loan payments and working toward your savings goals.
One thing that can easily slip through the cracks, however, is your taxes. You’re responsible for filing taxes once per year. Compiling your tax information takes time, and doing so may be more difficult if the tax-filing deadline sneaks up on you. Roughly 33% of Americans procrastinate and wait until the last minute to file their taxes.
So, what happens if you file taxes late? Today, we’ll answer not only that question but other frequently-asked questions you may have regarding your tax returns. We hope that by the end of this article, you find yourself a bit more prepared for tax-filing season.
When is the tax-filing deadline?
The tax-filing deadline for federal taxes varies from year to year. Deadlines are set by the Internal Revenue Service (IRS). In 2021, the tax-filing season opened on February 12 and was extended to May 17. In 2022, the tax-filing season opened on January 24. Deadlines for 2022 are as follows:
April 18 is the deadline for most taxpayers
April 19 is the deadline for taxpayers in Massachusetts and Maine
Victims of natural disasters may have unique deadlines specific to their location
These deadlines are for the previous tax year's earnings. For instance, any taxes owed from your 2021 earnings are due April 18, 2022. "Tax Day" may change from year to year. One of the first things you should do as a part of your annual tax preparation is to figure out when the due date is for the year.
In addition to federal taxes, you may also have to file tax returns in the state in which you reside or work. The filing deadline for most states is the same as the IRS due dates, but this may not always be the case.
If you plan to file taxes in a specific state, you may want to do a bit of research beforehand to figure out your tax due date. You can also work with a tax professional or use tax software like TurboTax and H&R Block to better understand your personal tax situation.
What happens if you file taxes late?
The answer to "what happens if you file taxes late?" depends on if you’re getting a tax refund or if you owe taxes.
If you’re receiving a tax refund, there’s no penalty for filing late. Obviously, filing is in your best interest, as you're missing out on money to which you're entitled. You can use the money from a tax refund to set up an emergency fund, pay off credit card debt with high interest rates or pursue your other financial goals.
If you owe taxes, it's important that you file as soon as possible. Otherwise, you face penalties, which can include late tax penalties and failure-to-pay penalties. There are different scenarios in which you can be charged penalties by the IRS, including:
Not filing your taxes on time
Not paying your tax debt on time or correctly
Not preparing an accurate return
Not providing accurate information on your returns
If you owe money when you file your income tax return, you are required to pay the full amount owed. If you have unpaid taxes, the IRS will charge you interest on your balance.
The IRS states that the failure-to-file penalty is typically more than the failure-to-pay penalty. “The penalty for filing late is normally 5% of the unpaid taxes for each month or part of a month that a tax return is late. That penalty starts accruing the day after the tax filing due date and will not exceed 25% of your unpaid taxes," according to the IRS. The failure-to-pay penalty is .5% of your unpaid taxes.
If you are more than 60 days late when filing, the minimum penalty is the lesser of 100% of your unpaid tax or $135.
As mentioned in the previous section, rules for state taxes may vary depending on where you live. Tax penalties may vary, so it's important to research what the regulations are in the states in which you're filing. If you don't want to worry about late-filing penalties, you can file your taxes on time — or request an extension.
Can you request an extension to file your taxes?
If you know that you’re going to miss the due date for your taxes, you should try to request an extension from the IRS and your state tax-filing agency.
Taxpayers can request an extension no matter how much they earn. If you do so, you have until October 15 to file your federal tax return.
However, a tax-filing extension does not absolve you of your tax liabilities. For instance, let's say that you owe money to the IRS based on the income you earned in 2021. The United States operates on a "pay-as-you-go" tax-filing system. So, you are required to pay your balance owed by April 18, even if you don't actually file until October 15.
If you don’t make payments on time, you may be subject to penalties. So while a tax extension gives filers extra time to file their paperwork with the IRS, it doesn’t give them an extension of time on their tax bill.
What happens if I can't pay my taxes?
If you can't pay the balance due on your taxes in full, there are other payment options available. Being proactive about setting up a payment plan can help you avoid underpayment and late-payment penalties.
If you're able to make your entire tax payment within 180 days, you can set up a short-term payment plan with the IRS. If it's going to take you longer than that to pay off your balance, you'll need to set up an installment agreement with the IRS. An installment agreement defines the monthly payment you'll make to the IRS to repay your balance.
If the balance that you owe is greater than $25,000, you don't have any choice but to sign up for Direct Pay. With Direct Pay, your payments are withdrawn from your bank account via direct deposit.
Be proactive about tax filing to avoid penalties
No matter if this is your first time paying taxes or you've done it for years, the process can be overwhelming. This is especially the case if you know you’re going to owe taxes. However, being proactive about filing your taxes can put you in the best position for success.
You should have an understanding of when your due dates are and what happens if you file taxes late. If you know that you’re going to owe taxes to the IRS, you should still file on time and then set up a payment plan for the amount that you’re not able to pay. Doing so can help you potentially avoid fees. A trusted tax professional can put you in the best position for success and can help you file your tax returns and payment plans correctly.
If you're looking for more financial advice, be sure to sign up for a free email newsletter from Tally†. You’ll receive tips and tricks to help reach your financial goals directly in your inbox.
†To get the benefits of a Tally line of credit, you must qualify for and accept a Tally line of credit. The APR (which is the same as your interest rate) will be between 7.90% and 29.99% per year and will be based on your credit history. The APR will vary with the market based on the Prime Rate. Annual fees range from $0 to $300.