Consequences of Failing to File or Filing Late US Taxes on April 15: What You Need to Know

If you haven’t yet filed your 2023 tax return with the IRS and still owe income taxes from last year, the good news is that you still have time to rectify those situations before you’re penalized for not doing so.

Most taxpayers have until 11:59 pm on Monday, April 15. However, some have an extra day or two if they live in Maine, Massachusetts, or Washington, D.C., due to holidays.

Additionally, other people who live or work in federally declared disaster areas will have even more time to file and pay thanks to extensions granted by the IRS. The IRS has also granted an extension to individuals and businesses affected by the October 7 terrorist attacks in Israel.

But if you’re not in any of those situations and can’t file a full return by Monday, at least submit Form 4868 for an automatic six-month extension to file.

Keep in mind that this is just an extension to file your return and avoid a penalty for not filing. It is not an extension to pay the outstanding balance you owe. That amount still expires on April 15.

So, if you think you still owe money, in addition to requesting an extension, send the IRS by Monday a payment that approximates what you think is the amount owed.

To get a reasonable estimate, look at your return from the previous year and find out what, if anything, changed in 2023 for you. Think in terms of your sources of income, such as salaries, dividends, interest, capital gains, rental income, taxable withdrawals from retirement accounts, etc. Also consider any major changes in your life, such as having a child, getting married, or getting divorced, which could have tax implications for you.

But if all that is too complicated right now, at least do a quick calculation to get a rough estimate of whether you owe more than what you already paid to the IRS last year. Multiply your 2023 income by 20% and make sure you have already paid that amount. If you haven’t, send a payment to cover the difference by Monday.

For some people who earn less than $200,000, the 20% calculation may overstate their tax liability, but that will protect them from fines. However, if your household income exceeds $200,000, you may underestimate what you owe and would be better off using 30% in your calculations.

Failure to file on time when you still owe taxes will subject you to a failure to file penalty, which is based on the delay in your return and the amount of unpaid taxes. Specifically, it will be 5% of your unpaid taxes for each month, or part of the month, that your return is late. The IRS notes, however, that this penalty will not exceed 25% of the unpaid taxes.

If you don’t pay what you owe by the tax filing deadline, you will also be assessed a nonpayment penalty, equivalent to 0.5% of your outstanding balance each month or part of the month that is not paid. Nor will it exceed 25% of the total.

If both a failure to file and a failure to pay penalty are assessed in the same month, you will be charged no more than a total of 5% according to the IRS.

Your outstanding balance will be subject to interest, so even if you can’t pay what you owe in full by Monday, at least send a partial payment to reduce the amount of penalties and interest that will accrue.

And read about the different ways you can work out a payment plan with the IRS, which can further limit your penalties and interest. If you owe a lot, it may be worth getting advice from a tax professional who can represent you before the IRS to choose the best plan for your circumstances.

Special note for self-employed workers and sole proprietors: Even if you file your return on time and pay everything you owe by April 15, you may be subject to an underpayment penalty if you didn’t pay your estimated taxes quarterly throughout the year or you paid less than you owed in a given quarter.

If you are a late filer who is owed a refund, you will not be assessed a penalty for failing to file if you miss the deadline. The IRS allows you to file your return up to three years after the original due date to receive your refund.

But submit the application within that period, as exceeding the three-year limit after the original due date will make you ineligible for the refund.