What Happens if You File Taxes Late & How to Avoid It

The consequences of not knowing what happens if you file taxes late can be quite costly.

You become subject to penalties and fines depending on the severity of your misdemeanor. While there are plausible reasons that may keep you from filing your taxes, that does not excuse any deliberate evasion of your tax-paying duties.

If you want to avoid facing an IRS audit or learn what you can do when penalized for late tax filing or late tax payment, read this comprehensive guide we’ve prepared.

Without any further ado, let’s begin!

Key Takeaways

• The deadline for filing taxes this year was April 18, with an extension set until October 17. File for a tax extension in case you are unable to settle your taxes on time.
• Failure to File and Failure to Pay penalties are the two plausible consequences that demonstrate what happens if you file taxes late.
• It is crucial to stay updated with tax deadlines and amendments made by the IRS to existing taxation rules to avoid penalties.
• The death of a family member, an illness, natural disasters, or system errors (for those filing taxes electronically) are valid reasons for disputing or appealing a penalty.

When Are Taxes Due?

To avoid worrying about what happens if you file taxes late, it is important to know when they are due.

The deadline for filing taxes (otherwise called tax day) is typically on the 15th of April every year. This year, the IRS moved the tax deadline to April 18 since the 15th fell on a Saturday. An extension on the 2023 deadline was also set until the 17th of October.

The IRS also publishes Publication 509, which contains information about the due dates for different tax forms.

The publication is updated annually to ensure taxpayers, particularly self-employed individuals and business owners, stay updated with the changes in submitting all essential tax documents.

Keep in mind that federal and state tax deadlines differ. Each state is responsible for determining its tax deadlines. Still, the majority prefer to align their deadlines with the IRS’s guidelines.

What Happens if You File Taxes Late?

There are four possible consequences that answer what happens if you file taxes late:

You Don’t File Taxes

Unless you are tax-exempt, filing your taxes is a responsibility that you must fulfill. Otherwise, you are subject to face Failure to File penalties. The IRS sends you a letter to notify you if you owe the penalty.

Failure to File penalties are calculated based on the length of time that has passed since you missed the tax deadline. The IRS will also take into account the amount of taxes you owe prior to the due date.

If you are a taxpayer who regularly receives a lawfully acceptable gross income amount within a given tax year, then you must file your tax returns. Otherwise, you will also face the Failure to File penalty and other additional fees, depending on how negligent you have become with your tax responsibilities.

You File Taxes, But Don’t Pay Them

Let’s say you filed your taxes on time but did not pay your taxes owed. That will still hold you liable for Failure to Pay penalties. You will also pay the interest incurred on your unpaid taxes on top of the original amount you are required to pay.

The Failure to Pay penalty fee is 0.5%of the amount you owe per month that you have not settled your taxes. The fee can go up to a maximum of 25%.

You Don’t File Nor Pay Them

Ideally, tax responsibilities are fulfilled gradually, typically through income taxes. Your employer withholds a percentage of your gross salary to pay the amount of taxes you owe.

The said method is practical because you don’t have to pay taxes in bulk, which could be quite a heavy load to pay out of pocket.

On the other hand, if you do not file or pay taxes, then you will likely face both Failure to File and Failure to Pay penalties. At the same time, you will accrue interest on your unpaid taxes.

Some of the worst-case scenarios, if you leave your taxes unpaid, involve the government seizing your assets and properties or placing you behind bars.

What Happens If You Don’t File Your Taxes But You Don’t Owe Anything?

It is possible to owe zero taxes come April, or the so-called tax season. However, you must be able to calculate your tax withholdings and strategize how to pay them off to ensure you no longer have any balance left once the tax deadline is right around the corner.

You qualify for a tax refund if you don’t owe the federal, state, or local governments any taxes. The IRS gives taxpayers a maximum of three years to claim their tax refunds. Those who have unclaimed tax refunds from the year 2019 have until July 17, 2023, to claim them.

What is the Penalty for Filing Taxes Late?

If you file your taxes late or pay your taxes past the due date, you will face any or a combination of the following sanctions:

• A combined monthly penalty of 5%. The 5% is a combination of the 4.5% late filing fee and the 0.5% for payments past the due date. If left unsettled, you can accumulate up to 25% in penalty fees.
• Taxes left unpaid after five months yield the maximum penalty for failure to file (22.5%) plus the fees for unpaid taxes (25%). The combined fees equate to a total of 47.5% in penalties.
• Taxes that are filed a maximum of 60 days after the deadline are subject to a fine of not more than $435.

Aside from the penalty fees, you may even face interest on your unpaid taxes. If you have exceeded the maximum limitation and penalties for late filing and unpaid taxes, you will likely face five to six years in jail.

You will also be charged by the government with criminal tax evasion.

How to Avoid an IRS Penalty for Late Filing

Instead of stressing yourself out over what happens if you file taxes late, it is best to follow these simple tips to avoid possible punishments:

• Check that your records are updated to ensure that you are on schedule with fulfilling your tax obligations.
• Pay your taxes on time. If your employer withholds taxes on your behalf, it would be best to review your pay stub to confirm that your employer regularly sets aside the correct amount for your taxes.
• Stay well-informed of any changes in the tax deadlines set by the IRS. Also, take note that tax deadlines are automatically moved to the next business day if the due date falls on a weekend or a legal holiday.
• File for an extension if you know that you will not be able to file your taxes in time for the April deadline. This year, you have until October 17 to file your taxes. You can also take note of the quarterly estimates for tax payments and adjust your withholdings accordingly.
• Provide a valid reason for not being able to file taxes on time. The IRS takes into consideration unforeseen and uncontrollable circumstances such as natural disasters, fire, death, serious illness, and technical problems that delay the filing of taxes electronically. If the IRS deems your reason for late filing or payment valid and justifiable, you may qualify for penalty relief.

Will The IRS Send a Notice If You Filed Your Taxes Late?

The answer is yes—the IRS will send you a notice once it has been determined that you have not yet filed your tax return.

The IRS does not spare anyone from an audit, especially if it involves filing or paying taxes past the deadline. You can be a business owner, an independent contractor, or a self-employed individual, and you will still be prompted for an audit once the IRS determines discrepancies in your returns.

Notifications may be sent either through the mail or by inviting you for an in-person interview. They will then review your records and take note of the inconsistencies they discover.

Receiving a notification from the IRS via mail also means they are requesting additional documents that may aid in auditing your tax returns. However, if the IRS requests several documents from you, you may request an in-person audit instead.

Can You Dispute an IRS Penalty?

It is crucial to understand what happens if you file taxes late. At the same time, you must also take the time to review the details of the penalty to determine whether you can dispute it or file an appeal.

To dispute an IRS penalty, you must file a Penalty Abatement request to counter failure to file and failure to pay penalties. File a written protest and mail it to the address indicated in the letter sent to you by the IRS.

Another option is to assess whether you qualify for penalty relief. The IRS has a guide that taxpayers can read and review to determine which penalties qualify for penalty relief.

Here’s a forewarning: Appealing or disputing an IRS penalty can be quite tricky and tedious.

You must also be prepared to provide a complete and detailed account that explains why you were not able to file and settle your taxes on time.

How Long Can You Go Without Paying Taxes?

Knowing what happens if you file taxes late should serve as a mental note to yourself to avoid incurring additional and even heavier consequences for your unpaid taxes. If possible, settle your taxes and penalties once you have the opportunity.

It is also best to contact the IRS’s customer support hotline at 800-829-1040 for any inquiries on your tax refunds and deadlines.

On the other hand, intentionally leaving your taxes unpaid for a prolonged period is considered a crime. You may face tax evasion charges, amassed interest and penalty fees on your unpaid taxes, up to five years in jail, and fines that range from $100,000 to $250,000.

Final Thoughts

The amount paid by employers, employees, self-employed individuals, and organizations for taxes serves as the lifeblood of various welfare projects and infrastructures that benefit the community.

It is not enough to simply know what happens if you file taxes late or fail to settle your unpaid taxes.

It is also necessary to understand the different courses of action that you can take in case you are unable to meet the deadline provided by the IRS, whether you qualify for a refund or an appeal or must simply settle your balances to resolve the matter.