With another Tax Day in the books, most Americans have turned their attention away from their tax woes. Now they’re thinking about other pressing issues, like the end of the school year, summer, and perhaps even how to spend that juicy tax return.
But if you’re in the other group of Americans and didn’t quite make the federal tax deadline, we can be pretty certain you’re still thinking about your taxes. In fact, it’s probably just about impossible not to.
We want to say this up front: You aren’t alone.
There are millions of taxpayers each year who don’t end up filing by Tax Day for a ton of reasons. Life happens and spring is a busy time of year! Everything from calendar overload to a loss in the family or natural disasters can get in between you and getting your taxes filed by the mid-April deadline.
With that said, we understand that it happens may not be the condolences you’re looking for right now. Instead, what you’re probably looking for are answers to some of the bigger questions on your mind right now:
What are the penalties for missing the tax deadline? Do you owe extra fees if you file late? How can you avoid missing the tax deadline in the future?
You have a lot of questions, and we have a lot of answers. We’re going to answer some of the most common post-Tax Day questions one by one to make sure you can get back on track—and back on the IRS’s good side right away.
What kinds of penalties and fees might I be charged when I miss the tax deadline?
When you don’t file your tax return by the return due date, you’re charged one or more common penalties. We’ve collected them below, directly from the IRS website:
- Failure to file – when you don’t file your tax return due date, April 15, or the extended due date if an extension to file is requested and approved.
- Failure to pay – when you don’t pay the taxes reported on your return in full by the due date, April 15. An extension to file doesn’t extend the time to pay.
- Failure to pay proper estimated tax – when you don’t pay enough taxes due for the year with your quarterly estimated tax payments, or through withholding, when required.
- Dishonored check – when your bank doesn’t honor your check or other form of payment.
A good way of thinking about the aforementioned penalties is as follows: You either need to pay your taxes on Tax Day or quarterly, depending on your income. If you’re late to pay or if something gets in between your payment and the IRS, you’ll probably be penalized.
How are penalties calculated?
Penalties vary based on the issue the IRS is addressing and usually amount to a percentage of the total you owed the IRS.
Failure to File
Penalty: 5% of unpaid tax required to be reported, charged each month the return is late (up to 5 months), even if it’s only a partial month.
Extra Details: There are a few other specifics to how this total is calculated, but it’s important to keep in mind that it really only applies if you owe money to the IRS. After all, if you’re owed a refund that means you owe $0, and 5% of $0 is…you get the idea.
Failure to Pay Tax (Reported or Unreported)
Penalty: 0.5% of tax not paid by due date; 0.25% during approved installment agreement (if return was filed on time); 1% if tax is not paid within 10 days of a notice of intent to levy.
Extra Details: It’s probably good to think about this as a primary penalty, because it’s a direct response to not paying your taxes. Each month this penalty will apply, even if you pay before the end of the month. But there are some intricacies based on your situation and the dollar amount you owe, so we’d recommend checking out what the IRS has to say.
Failure to Pay Estimated Tax
Penalty: Calculated separately for each required installment based on the number of days late and the effective interest rate for the period.
Extra Details: You’ll want to use Form 2210 to calculate your taxes, and fortunately you won’t need to pay this estimated total if you expect to owe at least $1,000 after subtracting your credits and withholding.
Penalty: 2% of the amount for payments of $1,250 or more. For payments less than $1,250, the penalty is the payment amount or $25 (whichever is lower).
Extra Details: This is pretty straightforward, but just remember this penalty doesn’t just apply to a check that bounces. Any form of payment can land you in trouble, so make sure your money is in the right account when you make the payment.
Does filing for an extension give me more time to pay?
Filing for an extension can be a huge relief if you’re running down to the wire on your tax return, but there’s a bit of misunderstanding out there about what deadlines you’re actually extending.
Unfortunately, filing an extension won’t extend the time you have to pay, so it won’t help you avoid any penalties for nonpayment. If you’ve already paid your taxes by Tax Day, though, filing an extension can help you avoid paying that pesky “failure to file” penalty.
(Though, of course, most people will learn of their tax obligation as they complete their tax return—so that may not be a big relief to you.)
How do I avoid penalties in the future?
There are a few easy ways to avoid running into penalties with the IRS. We’ve outlined a few possibilities below:
- Adjust your withholding. While this won’t help you file your taxes faster, adjusting your withholding on your tax forms may help you get a tax refund rather than a tax balance.
- Start filing early. Organizing your paperwork early and breaking down your tax filing into smaller tasks can help you reach the finish line faster.
- Enlist help. A tax preparation service can bring an added cost, but you may find it’s more than worth it when you have experts helping you to avoid penalties in the future.
Get Those Taxes Filed Fast!
Hopefully, you’re feeling a bit more knowledgeable about the kinds of penalties you may owe the IRS. But this is just the starting line. Your next step should involve getting those taxes filed as soon as you can, then opening up a dialogue about paying your taxes and any penalties you owe. It may feel overwhelming, but trust us—you never have to go it alone.