If you file your federal income taxes late and owe money, you will likely face penalties and interest charges from the IRS. The main consequences are:
- Failure-to-file penalty: This is 5% of the unpaid tax for each month or part of a month your return is late, capped at 25% of the tax owed. Even filing one day late triggers the full 5% penalty for that month
- Failure-to-pay penalty: If you don't pay your taxes by the deadline, you incur a penalty of 0.5% of the unpaid taxes for each month or part of a month the balance remains unpaid, up to 25% of the unpaid amount
- The IRS reduces the failure-to-file penalty by the amount of the failure-to-pay penalty if both apply in the same month, so the combined penalty is 5% per month (e.g., 4.5% failure-to-file plus 0.5% failure-to-pay)
- Interest: The IRS charges interest on any unpaid tax from the original due date until payment, with the current annual interest rate around 7%
- If your return is more than 60 days late, the minimum failure-to-file penalty is either $510 or the amount of tax owed, whichever is smaller
If you are due a refund, there is no penalty for filing late, but your refund will be delayed. You have up to three years from the deadline to claim a refund before it is forfeited
. To avoid penalties, you can file for an extension using IRS Form 4868, which gives you six more months to file, but you still need to pay at least 90% of your tax owed by the original deadline to avoid the failure-to-pay penalty
. Some taxpayers may qualify for penalty relief (abatement) if they have a reasonable cause or meet first-time penalty abatement criteria
. In summary, filing taxes late when you owe money results in significant penalties and interest that increase the longer you delay. Filing as soon as possible and paying what you can helps reduce these costs. If you expect to be late, filing an extension and paying estimated taxes by the deadline can help avoid some penalties
