How to File Your Taxes Late: Everything You Need to Know
Missed the tax deadline? You’re not out of luck yet! The sooner you can file your return and pay your taxes, the fewer penalties (if any!) you’ll owe. Here’s what you need to know.
What to Do If It’s Almost the Deadline
If it’s not quite the tax deadline yet, but you’re cutting it pretty close and aren’t sure you’ll be able to file your return in time, file for an extension immediately. This allows you six more months to file your tax return, giving you some breathing room to make sure you accurately submit all your information.
Note: even if you file an extension, you still need to pay the taxes you owe by the April deadline. Otherwise, you’ll face late tax payment penalties.
What to Do If You Missed the Deadline
If the deadline has passed, it’s too late to file for an extension, but do not wait until next year to file your return and pay your taxes! Late payment and late filing penalties accrue over time, so filing a day or even a week late could mean a very low penalty. Plus, there are two good reasons to file quickly, even if you missed the deadline.
You can’t get your refund until you file. Fun fact: if you’re due a refund, there’s no penalty for filing late! That’s because late penalties are based on the percentage of tax you owe. If you owe $0 in taxes, then you won’t be able to accrue a late filing penalty. However, you can’t get your refund until you file. And if you don’t file your return within three years of the original due date, you could lose out on the refund entirely.
You could lose your health insurance subsidy. If you’re currently receiving a subsidy (the Premium Tax Credit) to help pay for health insurance, you’ll want to file your return ASAP. The IRS uses tax time to square away health insurance credits and make sure taxpayers received the right subsidy amount. When you fail to submit your tax return, you impede this process and jeopardize your subsidy entirely.
Late Tax Penalties
If you delay submitting your return, you will have to pay:
The failure-to-file penalty for not filing your return on time. This is a 4.5 percent late fee (plus interest) for each month your return is late; the fee applies to the tax that remains unpaid after the deadline. This penalty maxes out at 22.5 percent after five months. If after 60 days you still have not submitted your return, the minimum penalty will be either $205 or 100 percent of the tax you owe (whichever is smaller).
The failure-to-pay penalty for failing to pay the taxes you owe. It is a 0.5% late fee for each month your return is late. This penalty accrues until your tax is paid, up to 25% of your total owed tax.
If you fail to both file and pay your taxes, these penalties combine for a 5% monthly fee. Because the failure-to-pay penalty is so much smaller, it’s to your advantage to file your return as soon as possible, even if you can’t afford to pay your taxes right away.
What to Do If You Can't Afford Your Entire Tax Bill
When it comes to taxes, it is to your advantage to pay as much as you can as soon as possible; this will reduce the penalties and interest you owe over time. If you have remaining penalties and taxes that you cannot currently afford, you can:
Request a payment extension: You can use the Form 1127 to request an extension on your tax payments. You need to prove that paying your taxes would cause you undue hardship. Pro tip: Form 1127 needs to be filed by April 15!
Apply online for a monthly payment plan. The IRS offers short- and long-term payment plans that you can apply for online. They charge a small setup fee to get started, and you will still owe late penalties.
Pay what you owe by credit card. If you have a low-interest credit card, this option is one way to reduce the penalties and fees you owe the IRS. However, if you have a high-interest credit card, stick to the IRS’s lower rates as you work to pay off your debt.
Apply for an offer in compromise (OIC). An OIC negotiates your debt with the IRS to a lower rate. This option should be considered as a last resort as it is similar to bankruptcy and requires you to offer up your net worth. OIC applications are typically only accepted when the tax you owe is greater than your Reasonable Collection Potential, a measurement that determines your ability to pay taxes. To qualify for an OIC, you need to have filed all your returns.