When You File Late

Last updated on August 26, 2024

When you file taxes past the annual deadline, you’re charged penalties and interest by the IRS. If, for example, you file three months after the deadline, you’re charged both penalties and interest for three months.

The penalty for late filing is more costly than the penalty for failing-to-pay. The IRS calculates the failure-to-file penalty based on the time that has elapsed since the last date for filing returns. The failure-to-file penalty begins at 5 percent for each month and can reach up to a maximum of 25 percent.

Failure-to-pay carries a penalty of 0.5 percent of the total tax debt amount each month, but in some cases it can reach up to a maximum of 25 percent. In addition to penalties, interest is also charged on the unpaid taxes each month.

Another concern when you file late is that the IRS may eventually file a substitute tax return on your behalf. This is filed by the IRS to determine the amount of taxes owed so that they may begin collection of back taxes. A substitute tax return does not include deductions and credits that you may qualify for. If the IRS receives the return filed by the taxpayer after they have filed a substitute, they use the taxpayer’s return to collect the back taxes.

Even if you do not owe any taxes, you must file on time to avoid complications with the IRS and unnecessary stress. If you cannot file on time, you may get an extension.