What Happens If You Don’t File Your Taxes or an Extension by April 15?

Navigating the Tax Deadline: What Happens if You File Late?

Tax Day, the annual deadline for individual income tax returns, is rapidly approaching. For most taxpayers, April 15 marks the crucial date to file with the IRS. Missing this tax deadline can lead to penalties and interest if taxes are owed, but understanding the rules is essential, especially with numerous tax software picks available to assist filers. This guide clarifies the implications of late tax filings, outlining potential penalties, interest charges, and available payment options.

For those anticipating a tax refund, a late filing primarily delays the receipt of your funds. While there’s no penalty for late filing when a refund is due, procrastination means the IRS holds onto your money longer. Conversely, if taxes are owed, timely filing and payment are critical to avoid accumulating penalties and interest.

Continue reading to explore the consequences of filing tax returns past the deadline, including details on penalties, interest accrual, and available payment plans. For assistance with filing, explore resources on top-rated tax software and learn how to monitor your tax refund.

Late Tax Returns and Anticipated Refunds

If you expect a refund from the IRS for the 2024 tax year, late filing doesn’t incur penalties. Taxpayers have a three-year window to claim their 2024 tax refund. After this period, unclaimed refunds revert to the U.S. Treasury.

Although a late filing may postpone your refund, you should still expect to receive it within approximately four to six weeks.

Accessing your tax refund promptly can be beneficial. Delaying your tax filing means losing potential opportunities to utilize these funds. Whether allocating your refund to debt reduction, emergency savings, investments, or personal expenses, receiving your money sooner maximizes its financial impact.

Consequences of Late Filing When Taxes Are Owed

Failing to meet the tax deadline and owing taxes can trigger both late filing and late payment penalties. Additionally, interest will accrue on the unpaid tax amount until it is settled.

Understanding Late Filing Penalties and Interest

The IRS imposes two primary penalties for late tax filings when taxes are due: a failure-to-file penalty and a failure-to-pay penalty. Interest charges are also applied to the outstanding balance.

Failure-to-File Penalty

The failure-to-file penalty is generally the more substantial of the two. It is calculated at 5% of the unpaid taxes for each month or part of a month the return is late, up to a maximum of 25%. For returns delayed by more than 60 days, 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, designed to encourage timely payment. This penalty is typically 0.5% of the unpaid taxes for each month or part of a month that payment is late, also capped at 25% of the total unpaid tax.

Interest on Unpaid Taxes

The IRS also charges interest on overdue taxes. This rate, determined quarterly, is currently 7%, calculated by adding 3% to the short-term federal interest rate. Interest accrues daily.

Tax Extensions: Are They Still Possible After the Deadline?

Unfortunately, tax extensions cannot be filed after the tax deadline. Extensions grant taxpayers an additional six months to file their returns, but the extension request itself must be submitted by the original April deadline. When filing for an extension, taxpayers must estimate their tax liability using IRS Form 1040-ES. Tax preparation software can assist in estimating taxes owed.

To request a tax extension from the IRS, it must be filed by the April 15 deadline. Electronic submissions or paper forms (IRS Form 4868) must be postmarked or electronically filed by midnight on April 15. Exceptions are made for federally declared disaster areas, which may receive automatic extensions. Regardless of the initial deadline, approved tax extensions typically move the filing deadline to October 15.

Timely Filed Tax Extensions

Filing a tax extension by the April 15 deadline provides until October 15 to submit your 2024 tax return. If estimated tax payments made are reasonably close to the actual tax liability, penalties are generally avoided, provided the return is filed and any remaining balance is paid by October 15.

Underpaying the estimated tax with an extension may result in a late payment penalty. The IRS expects estimated payments to cover at least 90% of the total tax liability. If this threshold isn’t met, a 0.5% monthly penalty may be applied to the unpaid amount. It remains advisable to complete and file your tax return as soon as feasible.

Addressing Inability to Pay Taxes Owed

Facing taxes owed without sufficient funds can be a source of significant stress. However, proactive steps can mitigate financial and emotional strain.

IRS Payment Plans

Consider establishing an IRS payment plan. For tax debts payable within 180 days, the IRS offers short-term payment plans without a setup fee, though penalties and interest continue to accrue until the debt is fully paid. Application is available online or at local IRS offices.

Long-Term Payment Options

For repayment periods exceeding 180 days, long-term payment plans are available. These entail a setup fee: $31 for automatic monthly payments via direct debit, or $130 for non-direct debit options. Qualified low-income taxpayers may have the direct-debit fee waived or pay a reduced $43 fee for non-direct debit plans.

Alternative Borrowing Solutions

Explore borrowing alternatives outside of IRS payment plans. For smaller tax liabilities, a 0% introductory APR credit card could facilitate tax payments, assuming timely repayment before the promotional period ends. For larger debts, debt consolidation loans are an option, though interest rates may exceed the IRS’s current 7% rate.