IRS penalties for late tax filers are determined based on specific circumstances. If you forgot to file and you’re owed a refund, the IRS won’t keep your money unless it believes you might owe a bill — but it won’t track you down to give you your refund, either. It’s up to you to file your taxes and collect the refund you’re owed.
If you’ve failed to file your taxes, you’re in one of two basic categories:
- You didn’t file, and you’re due a tax refund.
- You didn’t file, and you owe a tax payment.
If you fail to file and you owe the IRS money, you’ll likely face a series of charges and penalties. That said, you can still stay on the good side of the IRS as long as you take action and file as soon as you can. Here are answers to several frequently asked questions about filing taxes late.
What Are the IRS Penalties for Filing Taxes Late?
The IRS can assess a penalty for both paying and filing late. The failure-to-file penalty is 5 percent of the unpaid taxes for each month — or part of a month — that a tax return is late, up to a 25 percent penalty maximum. If you don’t file your taxes on April 18, you’ll be responsible for paying this fee.
If you file your IRS tax return more than 60 days after April 18, you’ll pay a minimum of $135 or 100 percent of your unpaid tax, whichever is smaller.
What Are the IRS Penalties for Paying Taxes Late?
If you owe taxes and haven’t filed, you’ll face both failure-to-file and failure-to-pay penalties. The failure-to-pay penalty is 0.5 percent of your unpaid taxes, and it applies for each month — or part of a month — after the due date; the penalty starts accruing the day after Tax Day.
If both penalties are assessed, the maximum penalty you’ll pay is 5 percent.
Keep Reading: 7 Tips for Dealine With a Delinquent Tax Return
What Are the Important Tax Deadlines?
In 2017, April 18 is the original tax due date and deadline to file for an extension. When April 15, the usual tax deadline date, falls on a weekend or holiday, the IRS pushes the deadline to the next business day. April 15 falls on a Saturday this year, and Monday, April 17 is Emancipation Day, a legal holiday in the District of Columbia. Thus, the IRS pushed the filing deadline to Tuesday, April 18. It is also the last day you can contribute to your retirement account for 2016.
Here are the important tax deadlines you need to know for 2017:
|2017 Tax Deadlines|
|April 18||Regular tax deadline: 2016 income tax returns and extension requests due|
|June 17||Last day to file without paying penalty for unpaid taxes|
|Oct. 16||Last day to file with extension|
Note that if you file your return after June 17, which is 60 days after the tax due date, you’ll pay a minimum penalty of $135 or 100 percent of the unpaid tax, whichever is smaller.
What If My Taxes Are Late?
Whether you owe money or are expecting a tax refund, the best thing to do is to file your taxes right away. If you’ve failed to file your taxes, there are a few steps you need to take:
- Determine if you have to file a return.
- Assess your filing status.
- Determine if you qualify for free tax preparation.
- Choose the simplest IRS forms.
- Calculate taxes and credits, claim dependents and file taxes either online or by mail.
- If you’re still not ready to fill out your IRS tax forms or send in the required documents, file federal tax extension Form 4868 to request an extra six months to file.
Before you get excited about the extension, you should know that it will grant you only additional time to file your return — not extra time to pay taxes you owe. Even if you’re filing a tax extension, you’ll still be responsible for submitting any taxes you owe as soon as possible.
Whether you submit your tax forms or not, the IRS has several ways of finding out about at least some of the income you’ve earned. Although it might not immediately seek you out, you’ll eventually hear from someone at the organization if you owe money. Paying your taxes in full is the only way to reduce or completely avoid paying penalties or interest.
If you’re filing late and you don’t owe taxes but are due a refund, the only penalty you’ll suffer is that you’ll get your refund later than you would have if you had filed on time.
What If I File Late and I Owe Taxes?
Again, even if you file for a tax extension, the extension will grant you additional time only to file your return — not to pay what you owe. When you file, you should pay your taxes immediately because you’re still responsible for sending the money in on time.
What If I Can’t Pay My Taxes When They’re Due?
If you can’t pay your taxes, you need to contact the IRS to set up a payment plan or request an extension. Make sure you understand what you’re asking for.
- Extension to pay: An extension to pay is separate from an extension to file taxes. Use Form 1127 to tell the IRS how much extra time you’re requesting, the reason you need the extension and provide supporting documentation.
- Installment plan: The IRS installment agreement requires you to pay a portion of your balance due each month until it’s paid off. The courtesy, however, comes with some fees, many of which have increased significantly. As of Jan. 1, 2017, the cost of setting up a regular installment plan increased from $120 to $225. The fee to set up a regular installment plan online increased from $120 to $149.
What Are the Tax Evasion Penalties?
In addition to basic fees, you could face tax evasion penalties if you choose not to file a return or pay the taxes you owe. This penalty depends on how the IRS views your failure to file and pay.
Your failure to file can fall into one of three categories:
- Negligence: You could face a penalty of 20 percent of the portion of the underpayments considered to be attributable to the negligence.
- Civil fraud: You could face a penalty of 75 percent of the tax underpayment attributable to fraud.
- Criminal fraud: You could face heavy court fines, imprisonment — or both.
In addition to these penalties, you could face an IRS tax audit of your taxes from previous years to ensure you’ve filed accurate returns in the past.
What If I Filed for a Tax Extension?
If you’ve filed for a tax extension, you might get an additional six months to file your taxes, but you must pay your taxes by the original tax deadline. If you can’t pay the full amount of taxes you owe, you must contact the IRS and request one of the payment plans mentioned earlier — an extension to pay or an installment plan.
What If I Can’t Afford to Pay Owed Taxes?
If you’re unable to pay your taxes in full, you can work out an agreement with the IRS by contacting the organization and requesting an extension to pay or an installment plan. Note that both of these options come with interest payments.
For a more extreme reason, such as financial hardship that prevents you from paying your taxes, you might be eligible for an offer in compromise or a temporary delay in tax collection. You can use Form 843 to claim a refund or request an abatement of some penalties, taxes, fees and interest.
If paying your taxes is going to be a problem, contact the agency via the IRS website, IRS.gov, or the IRS help line, 800-829-1040, to discuss your options. If you need more IRS tax help, consider reaching out to the Taxpayer Advocate Service, an independent organization within the IRS that helps taxpayers with tax problems.
Can I Be Exempt From Paying Late Penalties?
Exceptions to IRS rules about late-payment and late-filing penalties apply to certain cases. Here are some general guidelines for penalty exemptions:
- You’ll be exempt from paying a late-filing or late-payment penalty if you have what the IRS deems a reasonable cause.
- You might be exempt from a failure-to-pay penalty if you submitted a request for a tax-filing deadline extension and paid at least 90 percent of the taxes you owe with your request. You must have requested the tax extension by April 18, though, and you must pay any remaining balance by the extended due date.
- The IRS recommends you file your individual income tax return on time, even if you’re not able to pay all the taxes you owe by the due date. It’s possible to reduce additional interest and penalties by paying as much as you can with your tax return.
Find Out: How to File a Tax Extension With the IRS
What If I File Taxes Late After Receiving an Extension?
If you receive a six-month extension, try not to file past the October deadline. If you miss the extended deadline, you might be subject to separate penalties. Some taxpayers, such as military personnel serving in combat zones, might be eligible for longer extensions.
But even if you file late and owe back taxes, don’t despair; you can still request an IRS installment agreement.
File Your Taxes Even If You Can’t Pay
The bottom line is that you should file your taxes even if you can’t pay. If you can’t file your taxes on time, file an IRS tax extension form. If you can’t pay on time, set up a payment plan.
Once you’ve filed your taxes or requested an extension to file and have handled your payment, you’re all set. Your only remaining task will be to set a reminder for the April 2018 tax deadline so you don’t forget to file next year.