Facts About the Failure to File or Pay Penalties (411 × 600 px)

Facts About the Failure to File or Pay Penalties

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If you haven’t filed your tax return yet, you are not alone. If you’re ready to file now, let one of our experts get your taxes done right. Since people who are due refunds rush to file early, I’m guessing that you might be delaying filing because you know you will owe taxes. Well, delaying filing because you owe can be more costly for you.

Ignoring the IRS won’t make them go away. The IRS can assess a penalty if you fail to file, fail to pay, or both. Since the penalty for failing to file is usually greater than the penalty for failure to pay, here’s my number one tip for you: file your tax return by the tax deadline, even if you can’t pay the tax. At least that way you aren’t doubling up on penalties you face.

Here are some more facts you should know about possible IRS penalties.

Filing late can increase the amount you owe by 25%. The penalty for filing late is usually 5% of the unpaid taxes for each month or part of a month that your return is late. This penalty will not exceed 25% of your unpaid taxes. This penalty is imposed even if your return is just one day late. So if you file the day after the deadline, which is typically on April 15 (April 18 for tax year 2022 due to holiday), you’ll owe 5% more than you would otherwise.

Even if you don’t owe tax, there’s still a penalty for filing late. If you file your return more than 60 days after the due date, you’ll have to pay the minimum penalty, which is the smaller of $435 (for tax returns required to be filed in 2020, 2021, or 2022) or 100% of the unpaid tax. 

Paying late is costly as well. Not paying your taxes by the due date will garner you a failure-to-pay penalty of ½ of 1% of your unpaid taxes for each month or part of a month after the due date that the taxes are not paid. This penalty can be as much as 25% of your unpaid taxes. If both the failure-to-file penalty and the failure-to-pay penalty apply in any month, the 5% failure-to-file penalty is reduced by the failure-to-pay penalty. For example, instead of a 5% Failure to File Penalty for the month, the IRS would apply a 4.5% Failure to File Penalty and a 0.5% Failure to Pay Penalty.

Filing an extension may help. If you filed an extension to file, and you paid at least 90% of your tax by the tax deadline, you won’t have to pay a penalty for failure to pay the remaining balance as long as your taxes are paid in full by the extended due date.

Tell the IRS why you are late. If you have a really good excuse for why you couldn’t file or pay by the tax deadline, you may not have to face a failure-to-file or failure-to-pay penalty. So if you can show that you failed to file or pay on time because of reasonable cause and not because of willful neglect, let the IRS know.

So even if you can’t pay all the taxes you owe, you should still file your tax return on time and pay as much as you can, then explore other payment options.

18 responses to “Facts About the Failure to File or Pay Penalties”

  1. The city did not show I filed my tax return in 2016. They never contacted me until the end of 2017. I had a copy so I resent it to them stating I had filed and here is the copy. Not today, almost a year later i am getting a penalty for $150. I owed nothing on my taxes so is this right? where does the $150 come from?

    • Hi TJ,
      I have actually seen this and all taxes were able to be filed. You would need to get each previous version of TurboTax (2014 is still available at https://turbotax.intuit.com/) https://turbotax.intuit.com/personal-taxes/past-years-products.jspand then start filing the oldest year first. You can submit them all at once so any refunds can be offset against any amounts owed. If you were due a tax refund you can only get one for 3 years back as refunds can only be claimed 3 years from the due date of the tax return, if you owed on earlier years and were receiving a refund in the last 3 years the IRS will take the refunds you are eligible for and offset them against prior amounts if owed.
      Thank you,
      Lisa Greene-Lewis

  2. I helped a friend file his taxes recently and he is due a refund. He hasn’t filed in a few years though. Can he still expect to receive his refund?

    • Hi Michelle,
      If the IRS shows that he owes any back taxes that will hold up his tax refund.
      Thank you,
      Lisa Greene-Lewis

  3. “Even if you don’t owe tax, there’s still a penalty for filing late. If you file your return more than 60 days after the due date, you’ll have to pay the minimum penalty, which is the smaller of $135 or 100% of the unpaid tax. That means you’ll owe the IRS $135 for filing late, even if you don’t owe tax or expect to get a refund.”

    This doesn’t actually make sense or add up. The SMALLER of $135 OR 100% of the unpaid tax if you owe $0 in taxes is $0, for the record. There is no penalty for not filing if you are owed a refund.

    • Correct.
      We’ve discussed this in the comments below where I mention I gathered my 2012 and 2013 taxes together to file, here we are nearly a year later and I still haven’t sent them in.

  4. interesting – so as long as you don’t owe on your return whether you paid in $20 or $20,000 that so long as you owe no more there is not a penalty for filing after 4/15/??

    • Hi,
      You should however still file by 4/15 if you can and file an extension if you can’t make the deadline so the IRS does not send you a tax bill with what they think your tax should be. They do not know what possible deductions you have so they may show that you owe.
      Thank you,
      Lisa Greene-Lewis

      • I haven’t filed since 2003, what do I do to make it right? I want to retire and not have this over my head. I have no excuse why I haven’t filed and please don’t judge me. Please help me! Thank you

    • Correct. I used to file once every 3 years as after that you cannot file for taxes 4 years old. I file every 2 years now. I organized 2013 and 2012 and will get around to filing this summer when I need some extra $ for vacations (yes I could be investing $, so it’s a bad savings account). The IRS called me one time in 2005 and said they would file for me if I don’t do it and I said okay. I went and filed them before they did it, so I don’t know what they would have come up with. I doubt they call everyone who hasn’t filed, but that was my one experience with the IRS and not a bad one at all.

  5. This part of the article is inaccurate – That means you’ll owe the IRS $135 for filing late, even if you don’t owe tax or expect to get a refund.

    You will owe nothing if your taxes for the year are already paid off via payroll deduction, etc. The IRS is more than happy to keep your refund in such cases.

    • Agree…100% of $0 owed is $0…which is the ‘smaller’ of the two values. If they owe you, you don’t pay any penalty…but don’t make a mistake (by the way…$135 is the max you would pay…but this is just the filing penalty, not the payment penalty).

  6. I have lived abroad since 1976, and have never filed, believing that since I was earning nothing, I didn’t need to file. Except for about ten years (1991 – 2002), I have never earned more than about $1000 per year. When I was earning, I paid tax in the country where I was living. I am now considering renouncing my American citizenship – should I be worried that the IRS will fine me for never having filed?

    • They can only fine you for taxes owed I believe and John Daniels got it correct where the article got it wrong. As you haven’t filed, the IRS can go back and audit you 7 or 10 years (I’m not a tax professional, so I don’t ercall which one it is). My girlfriends’s sister moved to Canada and hasn’t filed for a while and is in the same situation, so I have researched this. Point 1, you still have to file if you are a citizen no matter where you live (1934 tax law). 2, any taxes you paid to foreign countries are credited to your taxes due to the US so long as the US and the foreign country have this agreement. 3, bank account interest counts as income, so if you’ve paid taxes and it would work out that you didn’t owe the US any taxes, you’re good, but you should go ahead and fill out a 1040EZ for the past few years just to make yourself feel better. Renouncing citizenship will clear you of future filings, but not past years, though it sounds like you’ll be perfectly safe.

  7. The penalty for filing 60, or more, days late is $135 or the amount of the tax due, whichever is less. However, if the taxpayer owes less than $135, the penalty is reduced but no less than zero. Example: If the taxpayer owes $100 and files 60 days late, the penalty is $100. But if the taxpayer is expecting a refund and files 60 days late, there is no late filing penalty.

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