Filing your taxes might not feel like a top priority during the busy spring season, but it’s a crucial responsibility for anyone earning income—whether it’s a small side gig or a full-time job. Missing the tax deadline can lead to financial consequences like late filing penalties, interest on unpaid taxes, and even notices from the IRS. These issues can quickly add up, creating unnecessary stress. Even if you can’t pay your taxes immediately, filing on time helps minimize penalties. Additionally, if you’re owed a refund, you won’t get it until you file your return. Staying organized and meeting deadlines ensures compliance with tax laws and helps you avoid costly mistakes down the road.
Am I Required to File Taxes?
Whether you need to file a tax return depends on several factors, such as your income source (self-employment, employer wages, or investments), income level, tax filing status, age, and other specific circumstances.
In general, not everyone is required to file a tax return each year. You only need to file a return if your income surpasses certain thresholds or if you meet specific criteria.
Typically, if your income is less than the Standard Deduction for your filing status, you won’t need to file a return. However, there are exceptions, and you may still need to file in certain cases. For instance, if any of the following apply to you, filing a return is necessary:
- Your income exceeds the Standard Deduction for your filing status.
- You have special circumstances such as earning $400 or more of net self-employment income.
- As a dependent child, you have unearned income exceeding $1,300 in 2024 ($1,350 in 2025).
Here are a few examples, and other scenarios may require you to file a tax return.
Even if you are not required to file, you might still want to. If you earned income and had taxes withheld, filing a tax return allows you to claim any refund you are due. The IRS does not automatically issue refunds if you’ve overpaid, so filing is the only way to receive your refund.
For example, if you are a single taxpayer who had $500 of federal income tax withheld from your $6,000 in earnings, you might be eligible for a refund since your income is below the Standard Deduction. However, you can only claim that refund by filing a tax return.
Remember, filing a tax return ensures you don’t miss out on any refunds you are entitled to!
What Are the Consequences of Filing Taxes Late?
Filing your taxes on time is always the best course of action, but life happens, and sometimes you may miss the deadline. If you’re late, don’t panic just yet—here’s what you need to know.
If you miss your filing deadline, the IRS may send you a letter requesting that you file your tax return. They’ll likely assess your income and withholding amounts, using the information provided on your W-2 and 1099 forms, to determine if you owe any taxes. If the IRS believes you owe taxes, they’ll reach out with instructions to file.
Failure to file your tax return on time can result in a “Failure to File Penalty.” This penalty is 5% of your unpaid taxes for each month your return is late, up to a maximum of 25%. Along with this penalty, the IRS will typically add interest based on how long your taxes remain unpaid.
It’s important to act quickly once you realize you’ve missed the deadline to minimize any penalties or interest.
What Happens If You Fail to File Your Taxes?
Filing your taxes on time is essential, and the sooner you do it, the better. But if you choose to ignore filing, the IRS has several ways to hold you accountable. These actions can include penalties, fines, interest charges, and even tax liens and levies.
It’s important to understand that a levy and a lien are distinct. A lien is a legal claim placed on your property to secure payment for your tax debt, while a levy actually takes your property to pay the tax owed. A federal tax lien is triggered when the IRS assesses your taxes and sends you a bill that you then neglect or refuse to pay.
If you’re expecting a refund, there’s no penalty for failing to file. However, by delaying, you risk missing out on that refund entirely. There’s a statute of limitations on claiming refunds, and if you don’t file your return within three years of the due date, you may no longer be eligible to receive your refund.
What Are the Consequences of Late Tax Payments?
If you miss the tax payment deadline after filing your return on time, the IRS is likely to impose a penalty. The penalty for late payment depends on how long the overdue amount remains unpaid. Typically, failing to pay is cheaper than the penalty for not filing: the IRS charges a 0.5% penalty per month or partial month the tax is unpaid. The total penalty for failing to pay usually doesn’t exceed 25% of the owed taxes, in addition to interest.
If both the failure to file and failure to pay penalties apply in the same month, the IRS will reduce the failure-to-file penalty by the failure-to-pay penalty. For example, if you didn’t file or pay your taxes for an entire month, the failure-to-file penalty (5%) will be reduced by 0.5%, leaving you with a net penalty of 5%.
The IRS may show some leniency if you filed your tax return on time but missed the payment and have an approved payment plan in place. In this case, the failure-to-pay penalty is reduced to 0.25% per month (or partial month) during the payment plan.
Even if you pay your taxes in full before the month ends, the IRS will still apply the full monthly penalties.
If you fail to pay for 60 days, your bill (including the original tax owed) will be at least $485 (2024 tax year) or 100% of the taxes due, whichever is lower.
However, you can request to have the penalty removed by contacting the IRS through a process called abatement—this is usually only granted to first-time offenders under the First Time Penalty Abatement Policy. Repeat offenders are unlikely to have their penalties waived.
Will Interest Apply If You Fail to File or Pay Taxes On Time?
If you miss the tax filing deadline, the IRS will not only impose penalties for failing to file on time but will also begin charging interest on your overdue taxes. The interest starts accumulating from the original due date of your taxes, typically April 15, though this may change based on the tax year. The IRS calculates interest by using the federal short-term rate, adding 3% to determine the amount owed. This interest continues to accrue over time, increasing your total liability. Therefore, even if you can’t pay your taxes in full right away, the longer you wait, the more you’ll owe.
In addition to the interest, it’s important to note that the IRS also applies interest to any penalties assessed for late filing and payment. This means that the penalties for not filing or paying on time will only increase as time passes. To avoid accumulating interest and penalties, it’s critical to file your tax return as soon as possible, even if you can’t make the full payment. By doing so, you can minimize your liability and prevent additional financial burden. Consider paying as much as you can when filing to reduce the amount of interest and penalties that may accumulate.
What Are the Consequences of Refusing to File Your Taxes?
Failing to file your taxes can lead to serious consequences, far beyond just penalties and interest. If you refuse to file, the IRS can place liens on your property or pursue civil or criminal action until you settle your debt. The IRS’s response will depend on how severe your refusal is.
If you don’t file, the IRS might file a return on your behalf, known as a substitute for return. This return will only include the information the IRS has, like your W-2 or 1099 forms, and will exclude any deductions or credits you could have claimed if you had filed yourself. This could result in you owing more taxes than necessary, along with additional penalties for late filing and interest charges that continue to accumulate.
It’s always better to file on time and avoid these complications to minimize the financial burden and legal risks.
Is Filing Taxes Necessary Even If It’s Not Required?
Although not everyone is required to file a tax return, nearly 170 million Americans chose to file in 2020. Even if you don’t have to file, it’s often in your best interest to do so.
For instance, if your paycheck has federal income tax withheld, you can only receive a refund for any excess tax payments by filing a return.
Additionally, certain tax credits, like the Earned Income Credit or the Recovery Rebate Credit (also known as “stimulus checks“), may only be available to you by filing, even if your income is low or you don’t meet other filing requirements. Keep in mind that missing out on these opportunities can leave money on the table.
What Are the Consequences of Not Filing Taxes When You Don’t Owe Money?
You might assume that if you don’t owe any taxes to the IRS, filing a return isn’t necessary. However, the IRS distinguishes between owing taxes and meeting the requirement to file a return, and they are treated as separate issues.
The IRS has specific guidelines to determine who must file a tax return, and these guidelines consider the amount and type of income you earn. Even if your income is below the Standard Deduction for your filing status and you don’t owe money, you may still be required to file a return.
In most cases, it’s safer to file a return, even if you don’t have to. Filing ensures you comply with IRS requirements and helps you avoid penalties, interest, and other consequences associated with failing to file or pay your taxes on time. Plus, you might qualify for refunds or credits you didn’t anticipate.
How Can I Avoid the Penalties for Filing Taxes Late?
To avoid the growing burden of penalties and interest, it’s crucial to file your tax return as soon as possible, even if you cannot pay the taxes immediately. Filing on time, or at least promptly after the deadline, minimizes your exposure to penalties, including the “Failure to File” penalty, which can reach up to 25% of your unpaid taxes. The IRS provides several options for those unable to pay immediately, such as installment agreements and payment plans that allow you to spread out your payments over time. These options offer some relief but don’t delay filing, as the longer you wait, the higher the penalties and interest will become.
If this is your first time missing the deadline, you may be eligible for penalty abatement, which could reduce or eliminate some of the penalties. The IRS often shows leniency to first-time offenders, particularly if they have a clean tax record. By taking swift action and filing as soon as possible, you can ensure that you minimize the overall financial impact, prevent further complications, and possibly qualify for relief through penalty abatement. Acting sooner rather than later can save you money in the long run, reducing the potential long-term consequences of missing the tax deadline.
Can I Request a Tax Extension?
If you’re unable to file your taxes by the deadline, you can request an extension to give yourself more time. Typically, an extension grants an additional six months to file your tax return. However, it’s essential to understand that this extension only applies to the filing deadline, not the payment deadline. Even with an extension, you’re still responsible for paying any taxes owed by the original due date.
Requesting an extension can be helpful, especially if you need more time to gather documents or resolve any uncertainties related to your tax situation. It allows you to avoid penalties for late filing, as long as you submit your return within the extended timeframe. Keep in mind that while an extension can give you more time to file, you should still plan to pay any taxes owed as soon as possible to minimize interest and penalties. Consider filing as soon as you have everything in order to avoid any unnecessary delays.
Steps to Take if You Can’t Pay Your Taxes Right Now
If you’re unable to pay your taxes immediately, don’t panic—there are options available. The IRS provides flexible payment plans that allow you to spread out your tax payments over time. You can apply for these options through the IRS website using the Online Payment Agreement tool.
Your eligibility for each plan depends on your individual tax situation, but you generally have three choices: full payment upfront, a short-term plan (180 days or less), or a long-term plan that involves monthly payments.
If you pay the full amount immediately using the IRS Direct Pay portal, you avoid a setup fee and prevent interest or penalties from accumulating. However, if you choose a short-term plan, you won’t pay a setup fee, but you will incur interest and penalties until you settle the balance.
If you choose a long-term plan with automatic withdrawals, the IRS will charge a $31 setup fee, unless you qualify for a fee waiver as a low-income taxpayer. Interest and penalties will continue to accumulate until you fully pay off your debt. If you choose to pay manually, expect a $130 fee to set up an installment agreement. And if you need to modify or reinstate an existing plan, a $10 fee will apply.
If you’re feeling overwhelmed, Austin & Larson Tax Resolution can provide a tax expert tailored to your situation. We offer full-service tax help or ongoing support to guide you through the process while you handle your taxes.
Conclusion
In conclusion, it’s crucial to stay on top of your tax obligations, as failing to file or pay on time can result in significant financial penalties, interest, and potential legal actions. Even if you’re unable to pay your taxes immediately, the IRS offers various options like payment plans or extensions to help you manage your tax debt over time. Filing your tax return, even if not strictly required, ensures you don’t miss out on potential refunds or tax credits you may be entitled to. The sooner you address any missed filings or payments, the lower your risk of facing severe financial consequences. If you’re unsure about how to proceed, consulting with a tax professional or tax resolution service can provide valuable assistance, helping you navigate the process and minimize your liabilities. By acting quickly, you can reduce stress and avoid future complications.
FAQ’s
1. What happens if I miss the tax filing deadline?
Missing the deadline results in penalties, interest on unpaid taxes, and possibly the IRS filing a return on your behalf. File as soon as possible to minimize penalties.
2. Can I still file my taxes if I miss the deadline?
Yes, you can file your taxes after the deadline. However, the IRS will impose penalties and interest. Filing sooner helps reduce those penalties.
3. What penalties do I face for filing taxes late?
The IRS imposes a “Failure to File” penalty of 5% of your unpaid taxes per month, up to 25%. Interest charges also apply to your overdue tax amount.
4. What if I can’t afford to pay my taxes right away?
If you can’t pay immediately, the IRS offers flexible payment plans. You can choose a short-term or long-term plan to pay over time. Interest and penalties continue to apply until you fully pay your debt.
5. Can I get an extension if I miss the filing deadline?
Yes, you can request an extension to file your taxes, which gives you six extra months. However, this only extends the filing deadline, not the payment deadline. You must pay any taxes owed by the original due date.
Recent Comments