What Happens If You File Late? (Spoiler: It’s Not Just a Slap on the Wrist)
So, you missed the April 15th deadline . . . now what?
Whether you meant to skip or simply lost track of time, it’s a good idea to figure out just what you’re in for. It’s not the first time this has happened, but there are consequences to filing late. What happens now that you’re officially late on filing your taxes?
Pay the Penalty
Late fees hit you where it hurts: right in the bank account. Unfortunately, you’ll owe a penalty for falling behind on things, and the longer you wait to fix the problem, the more you’ll end up paying. Let’s break it down.
There are two main penalties to consider. First, you have the Failure-to-file penalty, which is 5% of your unpaid taxes . . . for every month the return is late. While this is capped at 25%, that can still be a steep price to pay for your mistake.
The second fee is the Failure-to-pay penalty, which is 0.5% per month on the taxes you owe, up to 25%. If you owe the IRS money, those penalties stack, so you could be out a LOT of money. If you don’t owe them money but are due a refund, you won’t pay a penalty, but you’re limited to 3 years to claim your tax refund.
The Interest Piles Up
Penalties are bad enough, but did you know you also have to pay interest on unpaid taxes and penalties? It’s compounded daily, so it adds up fast!
For the first two quarters of 2025, the interest rate is 7%. Depending on how much you owe, it could be a lot more in just a short period of time. The interest rate is adjusted quarterly, so the sooner you pay up, the better.
How to Fix Things If You’re Already Behind
Feeling stressed about late taxes? That’s totally normal, but keep in mind that there are steps to take so you can get back on the IRS’s good side as soon as possible. It’s always best to be as upfront and honest as possible, and it’s highly recommended that you talk to a tax expert before doing anything else so you know you’re following the rules.
Here’s how you’re going to fix things:
Step 1: File your taxes ASAP, even if you aren’t able to pay just yet. This is important because it shows the IRS you mean business.
Step 2: Pay what you can. Again, this shows honesty and initiative.
Step 3: Apply for a payment plan or Offer in Compromise. Your tax expert can advise you on which is best for your situation.
Step 4: Continue paying until you’re done.
You should also keep in mind that you can file for a late refund within 3 years of the original deadline, but again, it’s a good idea to talk to your tax expert. Things are changing within the IRS, so you need someone who is on top of the latest changes.
Ready to get started on those taxes? Even if you’re late, the best time to start filing is now. Contact Ask Anna Tax to learn more about how to handle late taxes.
