What’s The Penalty If You File Your Taxes Late—Or Don’t File At All?

Janet Berry-Johnson, CPA, is a freelance writer with a background in accounting and income tax planning and preparation for individuals and small businesses. Her work has appeared in Business Insider and The New York Times. Janet has been nominated a.

Janet Berry-Johnson, CPA, is a freelance writer with a background in accounting and income tax planning and preparation for individuals and small businesses. Her work has appeared in Business Insider and The New York Times. Janet has been nominated a.

Janet Berry-Johnson, CPA, is a freelance writer with a background in accounting and income tax planning and preparation for individuals and small businesses. Her work has appeared in Business Insider and The New York Times. Janet has been nominated a.

Janet Berry-Johnson, CPA, is a freelance writer with a background in accounting and income tax planning and preparation for individuals and small businesses. Her work has appeared in Business Insider and The New York Times. Janet has been nominated a.

Kemberley Washington is a tax journalist and provides consumer-friendly tax tips for individuals and businesses. Her work goes beyond tax articles. She has been instrumental in tax product reviews and online tax calculators to help individuals make i.

Kemberley Washington is a tax journalist and provides consumer-friendly tax tips for individuals and businesses. Her work goes beyond tax articles. She has been instrumental in tax product reviews and online tax calculators to help individuals make i.

Kemberley Washington is a tax journalist and provides consumer-friendly tax tips for individuals and businesses. Her work goes beyond tax articles. She has been instrumental in tax product reviews and online tax calculators to help individuals make i.

Kemberley Washington is a tax journalist and provides consumer-friendly tax tips for individuals and businesses. Her work goes beyond tax articles. She has been instrumental in tax product reviews and online tax calculators to help individuals make i.

Updated: Apr 16, 2024, 10:27am

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If you miss the tax deadline, the IRS can charge two separate penalties: one for not filing your tax return and another for not paying what you owe.

You can avoid or minimize these penalties, but ignoring your tax filing obligations altogether isn’t usually an option. Here are the penalties that could be in store and ways to reduce them.

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What Is the Penalty for Not Filing Taxes?

Generally, the IRS charges a failure-to-file penalty on tax returns filed after the due date or the extended due date unless there’s a reasonable cause for late filing. This year, the deadline was April 15. The penalty is based on the amount of unpaid taxes and how late you file your return.

The IRS’s failure-to-file penalty is 5% of your unpaid taxes for each month or partial month your tax return is late. The fee is capped at 25% of your unpaid taxes.

What Is the Late Payment Penalty?

Another penalty applies when you don’t pay your full tax bill by the due date. The failure-to-pay penalty is 0.5% of your unpaid taxes for each full or partial month you don’t pay your tax bill—even if you’re just one or two days late. Like the failure-to-file penalty, the late payment penalty is capped at 25% of your unpaid taxes. The IRS can abate this penalty if you show reasonable cause for paying late.

If both the failure-to-file and failure-to-pay penalties apply, the IRS reduces your failure-to-file penalty by the amount of the failure-to-pay penalty.

For example, say you owe federal income taxes and didn’t file your return or pay your tax bill. In the first month, rather than assessing a 5% failure-to-file penalty plus a 0.5% failure-to-pay penalty, the IRS would apply a 4.5% late-filing penalty plus a 0.5% failure-to-pay penalty for a combined total of 5%.

What if You Are Owed a Refund?

If you’re owed a tax refund, the IRS doesn’t charge a penalty for filing your tax return late. However, there are two excellent reasons for filing your return as soon as possible.

• Claiming your refund. If you file your tax return too late, you could forfeit a refund. By law, you typically have three years to file a return and claim a tax refund. That three-year window starts on the original due date of the return. For example, your 2023 tax return was due April 15, 2024. If you haven’t filed your return for the 2023 tax year, you have until April 15, 2027, to file and claim a refund.
• Starting the clock on the statute of limitations. Generally, the IRS can audit tax returns filed within the past three years. This rule is known as the statute of limitations. However, there are some exceptions. If the IRS believes you’ve grossly understated your income—by 25% or more—it has an additional three years. The clock starts running once you file your return. So, if you filed your 2022 return on July 1, 2023, the IRS has until July 1, 2026, to audit your return—or July 1, 2029, if you underreported your income by at least 25%. When you delay filing, that clock never starts, so the IRS can choose to audit you five, 10 or even 15 years down the road.

How To Avoid a Failure-To-File Penalty

The best way to avoid a failure-to-file penalty is to file your return by the due date or request an automatic six-month extension. You can file a tax extension by mailing Form 4868 to the IRS. However, you’re still expected to pay the tax you owe on or before the due date. You can use Direct Pay, the Electronic Federal Tax Payment System (EFTPS) or a credit or debit card. Most of the best tax software platforms can electronically file an extension for you.

If filing on time isn’t an option, file and pay the taxes due as soon as possible. Then look into penalty abatement.

Penalty abatement is the process of removing penalties for taxpayers who made a mistake or faced extenuating circumstances. There are two common reasons the IRS may consider penalty relief.

1. Reasonable cause. If you didn’t file on time due to extenuating circumstances, the IRS may agree to waive your penalties. Examples of reasonable causes include a house fire, natural disaster, severe illness or death of an immediate family member.
2. First-time penalty abatement. If you’re normally on top of your filing responsibilities but missed the deadline for one reason or another, the IRS may allow a first-time penalty abatement. To qualify, you must have filed all your tax returns, paid the tax due or set up an installment agreement, and you must have no prior penalties within the past three years.

To request penalty abatement, call the toll-free number on your IRS notice or submit your request in writing using IRS Form 843. To have a penalty removed due to reasonable cause, you will need to send the IRS copies of supporting documentation, such as hospital records, a letter from your doctor, a death certificate or insurance claim reports.

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