Missed the Tax Deadline? Here’s What You Need to Know

You didn’t expect this to happen. Now it’s mid-April, and Tax Day has passed without you filing your return.

Now what? The consequences of filing late depend on whether you owe money, are due a refund, or break even. (Keep in mind that state and local deadlines may differ, so check with the appropriate agencies for specific rules.)

What Happens If You File Taxes Late?

If You Owe Taxes

Failing to file and pay on time can lead to penalties and interest, increasing what you owe the IRS over time. Here’s what to expect:

●      Failure-to-file penalty: This adds 5% of your unpaid taxes per month (minus any credits), up to a maximum of five months. If you’re more than 60 days late, the penalty is either 100% of what you owe or $485—whichever is lower.

●      Failure-to-pay penalty: If you do not pay what you owe by the deadline, you will face a penalty. This penalty is 0.5% of your unpaid taxes each month. It can go up to a maximum of 25%. If both penalties apply, the failure-to-file penalty is lowered. This keeps your total monthly penalties from going over 5%.

●      Accruing interest: On top of penalties, interest compounds daily on your unpaid taxes. The IRS adjusts this rate quarterly, but it’s generally the federal short-term rate plus 3%. Even unpaid penalties can accumulate interest.

●      Potential tax liens: If you keep ignoring your tax debt, the IRS may raise penalty rates. They could also place a lien on your assets.

If You Don’t Owe Taxes

Good news—you won’t be penalized for not filing. However, there are still reasons to submit your tax return:

●      You might be due a refund. If you overpaid taxes or qualify for credits and deductions, filing ensures you get that money back. You typically have up to three years from the original deadline to claim a refund.

●      Your income records matter. If you don’t file, the IRS may not have your correct income data. This can affect your financial aid, loan applications, and even Social Security benefits. This is especially true if you are self-employed.

What Are Your Options If You Need More Time?

If you cannot file by April 15, 2025, you can ask for an extension. This will give you until October 15, 2025, to submit your return. However, an extension only applies to filing—not paying. If you owe taxes, you still need to pay by April 15 to avoid penalties and interest.

If you can’t afford to pay in full, consider these options:

●      Set up a payment plan. The IRS offers short-term and long-term installment plans, which may reduce some penalties. You can apply online, by mail using Form 9465, or by calling the number on your balance notice.

●      Request an Offer in Compromise (OIC). If paying your full tax bill isn’t feasible, you may qualify to settle for a lower amount. Use the IRS’s OIC Pre-Qualifier tool to check eligibility before applying through Form 656.

●      Delay collection. If you cannot pay anything, you may qualify for temporary help. Call the IRS using the number on your collection notice.

While missing the tax deadline isn’t ideal, there are ways to manage the situation. The sooner you take action, the better your chances of minimizing penalties and interest.

* Please note that the IRS may charge fees for setting up a payment plan or processing an Offer in Compromise. Be sure to review these fees before proceeding with a request.

Sources:

https://www.fidelity.com/learning-center/smart-money/what-happens-if-you-file-taxes-late

Disclosure:

 This material is provided as a courtesy and for educational purposes only. Please consult your investment professional, legal or tax advisor for specific information pertaining to your situation.

 Advisory Services Network, LLC does not provide tax advice. The tax information contained herein is general and is not exhaustive by nature. Federal and state laws are complex and constantly changing. You should always consult your own legal or tax professional for information concerning your individual situation.