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Tax Day 2025: Understanding Late Filing and Penalties
The tax deadline is upon us. For most US taxpayers, Tax Day is April 15, 2025. While certain states provide automatic extensions, it’s crucial to be aware of your specific deadline. Missing the tax deadline, without filing for an extension or completing your tax return by the designated date, can lead to delinquent status.
Taxpayers anticipating a refund on their 2024 tax return might perceive no immediate consequence to late filing beyond a delay in receiving their funds from the IRS. However, for those owing taxes, procrastination can be costly. Penalties and interest accrue rapidly, increasing the overall tax burden.
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Explore the implications of late tax returns, including details on penalties, interest charges, and available payment plan options. Discover the best tax software for preparing your tax return, and learn how to track your tax refund directly to your bank account after filing.
What Happens If You File Taxes Late and Expect a Refund?
If you anticipate a tax refund from the IRS for your 2024 tax return, no penalties are imposed for late filing. In fact, you have a three-year window to submit your 2024 tax return before the IRS remits your refund to the Treasury, after which the funds are forfeited.
Although a late filing might cause a delay in receiving your tax refund, you should still anticipate receiving your funds within four to six weeks.
Accessing your tax refund promptly can be advantageous. Delaying your tax filing means prolonging the IRS’s hold on your money, hindering your financial opportunities. Whether allocating your tax refund to reduce credit card debt, establish an emergency savings, pursue investments, or simply enjoy a leisure activity, timely receipt of your funds is beneficial. Allowing the IRS to retain your tax refund for an extended period deprives you of potential interest earnings and immediate spending power.
Consequences of Missing the Tax Deadline When You Owe Money
Failing to meet the tax deadline, without filing for an extension, and owing taxes will likely result in late filing penalties and late payment penalties. Furthermore, interest will be charged on the outstanding tax amount until it is fully paid.
Understanding Late Tax Filing Penalties and Interest
The IRS imposes two primary penalties for late tax filing when taxes are owed: a failure-to-file penalty and a failure-to-pay penalty. In addition to these penalties, interest is also levied on the unpaid tax amount.
Failure-to-File Penalty
The failure-to-file penalty is the more substantial of the two. It is generally calculated at 5% of the unpaid tax amount for each month or part of a month the return is late, not exceeding a maximum penalty of 25%. For returns filed more than 60 days past the deadline, the minimum penalty is the smaller of $435 or 100% of the unpaid tax.
Failure-to-Pay Penalty
The failure-to-pay penalty is less severe, underscoring the importance of filing a tax extension even if immediate payment is not feasible. This penalty is typically 0.5% of the unpaid taxes for each month or part of a month the payment is late, also capped at a maximum of 25% of the total unpaid tax.
Interest on Late Taxes
The IRS also assesses interest on overdue taxes. This interest rate is determined by adding 3% to the federal short-term interest rate and is currently set at 7%. This rate is subject to quarterly adjustments, and interest accrues daily.
Is it Possible to File a Tax Extension After the Deadline?
Regrettably, no. While tax extensions grant taxpayers an additional six months to finalize their tax returns, these extensions must be requested by the original tax deadline. Taxpayers seeking an extension must also submit an estimated tax payment using IRS Form 1040-ES. Online tax software can expedite the calculation of estimated taxes.
To file a tax extension with the IRS, it must be done by the April 15 deadline. Extensions must be filed electronically or postmarked (if using IRS Form 4868 in paper form) by midnight on April 15, unless residing in a federally declared disaster area qualifying for automatic tax extensions. In such cases, the extension can be filed up to the revised tax deadline. Regardless of the specific tax deadline, all tax extensions ultimately extend the filing deadline to Oct. 15, 2024.
Tax Extension Filed On Time: Next Steps
Filing a tax extension by the April 15 deadline provides an additional six months to file your 2024 tax return. Provided that the estimated tax payment submitted is reasonably close to the actual tax liability, no late filing penalties will be imposed if the return is filed and any remaining tax due is paid by Oct. 15, 2025.
Insufficient payment with the tax extension may result in a late payment penalty. The IRS generally expects the estimated payment to cover at least 90% of the total tax liability. A penalty of 0.5% per month may be charged on the underpaid amount. Therefore, completing and filing the tax return as soon as possible remains advisable.
Navigating Tax Liabilities You Cannot Afford
Facing tax obligations without the immediate funds to pay can be a source of considerable stress. However, proactive steps can alleviate both financial and emotional strain.
Consider establishing an IRS payment plan. For tax debts manageable within 180 days, the IRS offers a short-term payment plan, free of setup fees, though penalties and interest continue to accrue until full payment. Application is easily completed online or at a local IRS office.
For extended repayment needs, a long-term payment plan is available, incurring a $31 fee for automatic monthly bank payments via direct debit, or $130 for non-direct debit options. Low-income taxpayers, meeting specific adjusted gross income criteria, may qualify for a waiver of the direct-debit installment plan fee or a reduced $43 fee for non-direct debit plans.
Explore alternative borrowing solutions outside of the IRS. For smaller tax liabilities, a credit card with a 0% introductory APR could be utilized, contingent on debt repayment before the promotional period concludes. For substantial tax debts, a debt-consolidation loan may be considered, although interest rates might exceed the IRS’s current 7% rate.