Does the IRS penalize you for filing late?

If you owe money on your taxes and fail to file your tax return by the deadline and don't file for an extension, you will pay a Failure to File Penalty. This is equal to 5% of the unpaid taxes each month that a return is late. This penalty can reach up to 25% of your unpaid taxes. The Failure to File Penalty maxes out after five months, but you'll continue to accrue penalties for failing to pay. If the return is more than 60 days late, according to the IRS, you'll pay the lesser of $435 or 100% of the tax owed.

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Here’s How To File Your Taxes From a Prior Year

June 21, 2023

6 min Read

Written by Dawn Allcot

Edited by Elizabeth Constantineau

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Filing taxes late isn’t an ideal financial situation, but it can happen for a variety of reasons. Depending on the reason you need to file your taxes late, you may be able to get an extension. That way, you can avoid any late filing penalties if you owe the IRS money on your federal tax returns. Filing taxes late isn’t anything to worry about or be ashamed of, but it is important to file as soon as you can to minimize late notices, penalties and fees.

What Happens if You File Your Taxes Late?

In 2023, Tax Day fell on April 18 for many Americans. In Alabama, California and Virginia, residents hit by storms received an automatic extension to May 15, 2023, to file and pay federal individual or business tax returns.

If you’ve missed those deadlines, however, you might be worried about the ramifications, financial and otherwise. Here are a few key takeaways to know:

If you couldn’t make the deadline, you had an opportunity to file for an automatic six-month extension. The date to file for this was the tax day deadline for your state. This extension would eliminate any late filing penalties and fees, but you’d still have to pay interest and late payment penalties on any taxes owed.
If you do not owe any federal taxes, you do not have to file a tax return.
If you are owed a refund or tax credit, it’s in your best interests to file so you can collect the money. You won’t pay any penalties or fees for filing late.
If you do owe taxes and fail to file on time, you should be prepared to pay penalties and fees, plus interest on the amount you owe.

How Many Years Late Can You File Taxes?

It is never too late to file taxes if you owe the IRS money. The Failure to Pay Penalty will continue to accrue, so it makes sense to pay your taxes as soon as you can or reach out to the IRS and set up a payment plan.

It’s important to note that if you fail to file, the IRS may file a tax return for you. That return may not reflect any tax deductions or exemptions you deserve, which could leave you with a large tax bill. If this happens, the IRS will send you a Notice of Deficiency. You will have 90 days to file a return with the accurate deductions, exemptions and income.

How To File Your Taxes From a Prior Year

If the IRS owes you a tax refund, you must file your past-due tax returns within three years to claim that money. This includes tax credits, such as the Earned Income Credit or the Child Tax Credit, as well as refunds from estimated quarterly taxes or withholding taxes taken from your paycheck. To claim your money or to avoid further fees, you should file your taxes as soon as you can. Here are a few options you can consider.

IRS Free File Program

The IRS Free File program makes it easy for Americans to file their taxes online and receive their refund promptly. Free File is open for extended or late tax returns through Oct. 16, 2023.

Taxpayers who have an adjusted gross income of less than $73,000 can take advantage of free guided tax preparation, with tax filings completed on an IRS partner site. Otherwise, you can use electronic forms to file your taxes for free online. Users will want to be familiar with basic tax prep to use the self-guided option.

Get Professional Tax Help

If you haven’t filed your 2023 taxes yet or you have unpaid tax bills, it’s a good idea to contact a tax professional. They may be able to help you find deductions to minimize your tax liability and can help you file your taxes quickly to avoid additional penalties.

If you have tax debt, a tax lawyer, tax accountant or tax debt relief firm may be able to help you negotiate a payment plan with the IRS. This could help you pay down your tax debt and maintain your current lifestyle. It’s important to make a payment as soon as possible to show the IRS you are willing to pay your debt.

IRS Late Payment Penalties: Fee Breakdown

Filing taxes late comes with some steep fees that can really add up and wreak havoc on your finances, savings goals and even your quality of life.

The Failure to File Penalty is equal to 5% of the unpaid taxes each month or partial month that a return is late. This penalty can reach up to 25% of your unpaid taxes. This penalty maxes out after five months but if your return is more than 60 days late, you’ll pay the lesser of $435 or 100% of the tax owed.
The Failure to Pay Penalty equals 0.5% of the unpaid taxes for each month or partial month that your bill goes unpaid. The penalty will not exceed 25% of your unpaid taxes.
If you have a Failure to File Penalty in addition to a Failure to Pay Penalty, your Failure to Pay Penalty will be reduced by the amount of your Failure to File Penalty.
When you owe back taxes, the IRS may send you a notice with an intent to levy your property. If this happens, the IRS will apply a 1% Failure to Pay Penalty per month or partial month. Even if you pay your taxes before the end of a month, you will still pay the penalty for that month.
If the IRS discovers that you owe more taxes than were reflected on your return, you will also pay a Failure to Pay Penalties on that amount.

Final Note

Filing your taxes on time can save you money and stress by helping you avoid late fees and penalties for unpaid taxes or late returns. If you are owed money on your tax returns, there’s no reason not to file your taxes and claim that money. You have up to three years to file a return if the federal government owes you a tax refund.

FAQ

Here are the answers to some of the most frequently asked questions regarding filing taxes late.

How late is too late to get a tax return?
- If the IRS owes you a tax refund, you must file your past-due tax returns within three years to claim that money.
Does the IRS penalize you for filing late?
- If you owe money on your taxes and fail to file your tax return by the deadline and don't file for an extension, you will pay a Failure to File Penalty. This is equal to 5% of the unpaid taxes each month that a return is late. This penalty can reach up to 25% of your unpaid taxes.
- The Failure to File Penalty maxes out after five months, but you'll continue to accrue penalties for failing to pay. If the return is more than 60 days late, according to the IRS, you'll pay the lesser of $435 or 100% of the tax owed.

Information is accurate as of June 21, 2023.

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