What Happens if You’re Late Filing Taxes?

It’s something we all fear – filing our income taxes late. We know there’s always a price to pay, but exactly how bad is that price and what exactly can we expect? If you’re curious about what the IRS charges taxpayers when tax returns aren’t filed by either the April 15 deadline or the extended October 15 deadline (and whether or not you should be speaking with a tax lawyer ASAP), here’s the scoop.

What taxpayers should know about filing late

The IRS considers filing taxes late to be among the worst things a taxpayer can do. The penalties incurred are the highest – way higher than if you don’t pay the amount you owe in back taxes on time. In fact, you can even risk losing any money you were to receive on your tax refund if you don’t file your return on time. Luckily, at least the IRS gives you three years to claim your return if you are late. The same goes if you were late claiming any money on tax credits, including your Earned Income Credit. When late to claim refunds or tax credits, the IRS will hold the money owed until they either a) receive the late return or b) receive a notice from the taxpayer explaining why they were late in filing. If it’s an acceptable reason, then no penalty will be charged.

If you still miss the three year deadline, then you can expect to lose all the money you were owed. At this point, the IRS will consider any refund or credit to be a “donation” and there will be no way to claim it. You can always consult with a tax attorney for assistance, but the IRS only has a certain amount of patience when it comes to late filings. Better claim as soon as you can – even if your calculations are wrong – than exceed the three year deadline. There’s always the option to file an amended return, which is something tax lawyers can help you with, than be exceedingly late to file in general.


Breakdown of IRS penalties for late taxes

There’s no “clear-cut” definition of what penalties will be assessed when taxes are filed late. The IRS treats each matter on a case-by-case basis, which can either help the taxpayer or create worse problems. As stated before, if you can provide a reasonable excuse for missing the deadline, the IRS will give you a break and will not charge you a penalty. However, if you cannot provide a good reason for filing late, then the penalties will generally be assessed as follows:

  • Taxpayers who file late will generally incur a 5% penalty on any taxes that are owed for each month (or fraction thereof) that the return is late, up to a maximum of 25%.
  • Taxpayers filing a late return that is over 60 days past due will incur minimum penalty of $135 or 100% of the unpaid tax amount, whichever is smaller.

It’s important to understand that the penalty for filing tax returns late can be 10 times higher than the penalty for not paying what is owed to the IRS in full by the due date. In summary, the best thing any taxpayer can do to reduce the penalties owed is to file as soon as possible after the deadline, even if mistakes are made, because tax returns can always be amended.