If you file your taxes late, the consequences depend on whether you owe taxes or are due a refund:
- If you owe taxes:
- You will face a failure-to-file penalty of 5% of the unpaid tax for each month or part of a month your return is late, up to a maximum of 25% of the tax owed
* There is also a **failure-to-pay penalty** of 0.5% per month on any unpaid taxes, which can increase to 1% per month if you don’t pay within 10 days after an IRS notice. This penalty is also capped at 25% of the unpaid tax
* If both penalties apply in the same month, the failure-to-file penalty is reduced by the failure-to-pay penalty, so you would pay 4.5% for filing late and 0.5% for paying late in that month
* The IRS charges **interest** on unpaid taxes and penalties from the due date until payment is made. The interest rate adjusts quarterly and is currently around 7% annually
* If your return is more than 60 days late, the minimum penalty is either $510 (for 2025) or 100% of the tax owed, whichever is less
- If you are due a refund:
- There are no penalties or interest for filing late.
- However, your refund will be delayed, and you must file within three years of the deadline to claim it; otherwise, you forfeit the refund
- Additional notes:
- You can avoid late filing penalties by filing for an extension (Form 4868), which gives you an automatic six-month extension to file, but you must still pay any taxes owed by the original deadline to avoid failure-to-pay penalties
* If you do not file, the IRS may file a substitute return on your behalf based on third-party information, which often results in a higher tax bill because it lacks deductions and credits you might be eligible for
* If you cannot pay your tax bill in full, it is better to pay what you can and arrange a payment plan with the IRS to reduce penalties and interest
In summary, filing late when you owe taxes results in substantial penalties and interest, while filing late when expecting a refund only delays your refund without penalties. Filing for an extension and paying what you can helps minimize these costs
