Forgetting to submit your tax return can be stressful. And even worse, the IRS can charge you a late filing penalty. Read on to learn about the penalty for late tax return and what you can do to avoid future penalties.
Penalty for late tax return
If you earn or receive income, you likely need to file an annual tax return, like Form 1040, U.S. Individual Income Tax Return. You use Form 1040 to report income and deductions to the IRS.
The individual tax return due date is April 15 each year. If the due date falls on a weekend or holiday, your tax return moves to the next business date. And if you forget to submit your tax return by April 15, you may receive a penalty from the IRS.
If you own a business, your business structure impacts your business tax return due date.
What is the penalty for late tax return? The penalty you receive for a late tax return depends on your situation.
Common reasons for late tax return penalties include:
- Failing to file your tax return by the due date
- Failing to pay the taxes you report on your return by the due date
- Not paying enough taxes for the year with estimated tax payments
The IRS calculates your penalties based on the above factors. To get a full breakdown of different penalties for failing to file or pay your tax return, visit the IRS’s website.
Whether or not you owe money to the IRS has a huge impact on the penalties you receive. And in some situations, the IRS does not penalize you.
If you don’t owe any money, you have little to worry about. Taxpayers who submit a late tax return and don’t owe money typically are not penalized.
Although you won’t be penalized, you should still file your tax return as soon as possible. For tax year 2018, the absolute latest you can file is April 15, 2022. If you file an extension, your tax return is due by October 15, 2022.
If you miss your Form 1040 deadline, your refunds are turned over to the U.S. Treasury.
Again, you do not receive a late penalty if you are receiving a tax refund and you do not owe money to the IRS.
Penalties for businesses
If you own a business and miss your deadline for filing, the IRS says you should file your business tax return as soon as possible. And if you owe business taxes, pay those as soon as possible.
Depending on the business and situation, you might receive a small financial penalty for a late filing or payment (e.g., interest fees). But in most cases, the IRS will accept your late payment with little hassle.
If you’re close to your deadline or miss it, consider e-Filing your late return if possible to speed up the process.
Late filing and payment penalties
Ultimately, the penalty you receive depends on whether your filing or payment is late. Take a look at the different types of penalties for paying or filing your tax return late.
Late filing penalties
You will likely receive a late filing penalty if one of the following is true:
- You owe taxes and didn’t file your return or extension by April 15
- You filed an extension but did not file your return by October 15
A late filing penalty can include:
- Paying 5% of the additional taxes owed for every month your return is late, up to a maximum of 25%
- If you file more than 60 days after the due date, you must pay the minimum penalty of $205 or 100% of your unpaid tax, whichever is higher
Late payment penalties
A late payment penalty applies if you did not pay taxes owed by April 15, regardless of if you filed an extension.
If you’re guilty of the above, penalties you’re subject to include:
- Paying 0.5% of the additional tax you owe for every month your tax remains unpaid, up to a max of 25%
If there are any months where both the late payment and filing payment penalties apply to you, the IRS waives the 0.5% late payment penalty.
Interest compounds daily and starts accumulating on unpaid taxes the day after your due date until your bill is paid off. Currently, the interest rate is 5%.
How to pay late tax return penalty
In most cases, the IRS will mail you a letter stating how much you owe in penalties.
If you need to pay a late tax return penalty, follow the instructions in your penalty letter and submit your filing or payment to the IRS as soon as possible.
If you can’t pay taxes on time or file your tax return, contact the IRS for additional options (e.g., installment plan).
Before you begin paying off your penalties, look into penalty relief. Eligible individuals and businesses may be excused from paying certain penalties.
Penalties eligible for relief include:
- Failing to file a tax return
- Forgetting to pay taxes on time
- Not depositing certain taxes
If you made an effort to comply with IRS requirements but were unable to meet your obligations because of circumstances beyond your control, you may be able to take advantage of penalty relief.
Check out the IRS’s website for more information about whether or not you qualify for penalty relief.
Avoiding a late tax return penalty
Forgetting to submit a tax return can happen to anybody. To help avoid being tardy on future tax returns, use the tips below:
- Prepare and pay (if applicable) your tax return in advance (e.g., one month before the due date)
- Add reminders on your calendar to help remember your due date
- Have a designated person remind you about your tax return due date
- Create a plan in case you forget to submit your tax return
- Use software so you aren’t scrambling to put your records together
Need an easy way to track income and expenses? Patriot’s accounting software makes your accounting responsibilities a breeze! And, we offer free, U.S.-based support if you have any questions. Get started with your self-guided demo today!
This article has been updated from its original publication date of July 11, 2019.
This is not intended as legal advice; for more information, please click here.