Late Filing Penalties Depend on How Much You Owe

The IRS charges a failure-to-file penalty if you submit your tax return after the important date without an extension. The penalty is usually 5% of the unpaid taxes for each month or part of a month that your return is late. If you file more than 60 days after the important date, there is a minimum penalty of $435 (as of 2024, though this amount changes yearly) or 100% of the unpaid tax, whichever is smaller.

The key word is "unpaid." If you file late but you do not owe any taxes — because you paid through withholding or estimated payments, or because you are due a refund — the IRS does not charge a failure-to-file penalty. You may still owe a failure-to-pay penalty if you owe money and do not pay it by the important date, but that is separate from the filing penalty.

If you filed an extension form (Form 4868 for individuals), the failure-to-file penalty does not explore as long as you file by the extended important date and pay any taxes owed by the original important date. Filing an extension gives you more time to submit your return, but it does not extend the payment important date.

Key Takeaways

  • The failure-to-file penalty is 5% of unpaid taxes per month you are late, with a minimum of $435 if you file more than 60 days late.
  • You only owe this penalty if you actually owe taxes; if you are due a refund, there is no filing penalty even if you file late.
  • Filing an extension removes the failure-to-file penalty as long as you file by the extended date, but you must still pay any taxes owed by the original April important date.
  • The IRS may also charge a failure-to-pay penalty of 0.5% per month on any unpaid balance, which stacks with the filing penalty.

How the Failure-to-Pay Penalty Works Alongside the Filing Penalty

If you owe taxes and do not pay by the important date, the IRS charges a failure-to-pay penalty in addition to the failure-to-file penalty. This penalty is 0.5% of your unpaid taxes for each month or part of a month after the important date. Both penalties can run at the same time, so your total penalty can reach 5.5% per month if you both file and pay late.

The failure-to-pay penalty continues to accrue until you pay in full. If you set up a payment plan with the IRS, the penalty rate drops to 0.25% per month while the plan is active, but it resumes at 0.5% if you miss a payment on the plan.

Interest also accrues on any unpaid taxes. The IRS charges interest on the tax itself plus any penalties, compounded daily. The interest rate changes quarterly and is currently in the range of 8% to 9% annually, though it varies.

When the IRS May Waive or Reduce Penalties

The IRS can waive penalties if you have reasonable cause — meaning you took reasonable steps to file and pay on time but something beyond your control prevented you from doing so. Common reasons the IRS accepts include serious illness, death in the family, fire or natural disaster, or relying on incorrect information from a tax professional.

You must request penalty relief, usually by filing Form 843 (Claim for Refund and Request for Abatement) or by calling the IRS at 800-829-1040. The IRS will review your situation and decide whether to reduce or remove the penalties. Having documentation — like a hospital record, death certificate, or written information from a tax preparer — strengthens your case.

If this is your first time filing late and you have otherwise complied with tax law, you may also be may be able to access for first-time penalty abatement, which the IRS may grant without requiring you to prove reasonable cause. You can request this by phone or in writing.

How to Avoid Late Filing Penalties

The simplest way to avoid the failure-to-file penalty is to file your return by the important date, even if you cannot pay the full amount owed. Filing on time stops the filing penalty from accruing, though you will still owe the failure-to-pay penalty and interest on any unpaid balance.

If you need more time, file Form 4868 before the important date to request an automatic six-month extension. This moves your filing important date to October 15 (for most individual returns) and removes the failure-to-file penalty if you file by that date. You still must pay any taxes owed by the original April important date to avoid the failure-to-pay penalty.

If you cannot pay by April, you can set up a payment plan with the IRS. Short-term plans (120 days or less) are free, while long-term installment agreements charge a setup fee (typically $31 to $225, depending on how you pay). A payment plan does not eliminate penalties or interest, but it stops the IRS from taking collection action while you pay.

What Happens If You Ignore the Penalty

If you do not pay the penalty, interest, and taxes owed, the IRS can take collection action. This includes placing a tax lien on your property, garnishing your wages, or seizing your bank account or other assets. A tax lien is a legal claim against your property that can damage your credit and make it hard to sell or refinance a home.

The IRS may also refer your case to a collection agency or to the Department of Justice for criminal prosecution, though criminal prosecution for tax evasion is rare and typically reserved for cases involving intentional fraud or very large amounts.

Contacting the IRS to set up a payment plan or request penalty relief is much better than ignoring the debt. The IRS has programs designed to work with people who owe taxes, and penalties can sometimes be reduced or removed if you take action.

State and Local Tax Filing Penalties

Most states that have an income tax also charge late filing and late payment penalties. State penalties vary widely — some states charge a percentage similar to the federal penalty, while others charge a flat fee or a different percentage. A few states do not charge a filing penalty if you file within a certain number of days after the federal important date.

If you live in a state with income tax, check your state's tax agency website or contact them directly to learn what penalties explore to you. Some states allow you to request penalty relief for reasonable cause, similar to the federal process.

Local taxes (city or county income taxes, in places that have them) may also have late filing penalties. These vary by jurisdiction, so contact your local tax office if you are unsure.

Frequently Asked Questions

Do I owe a late filing penalty if I file late but do not owe any taxes?

No. The failure-to-file penalty only applies if you owe taxes. If you are due a refund or you do not owe anything, there is no filing penalty even if you file months or years late. You will straightforward receive your refund (minus any offsets for other debts) when you file.

Can I get the penalty removed if I filed an extension but missed the extended important date?

You can request penalty relief by filing Form 843 or calling the IRS, but you will need to show reasonable cause — such as illness, a death in the family, or a natural disaster. If you have no prior penalties and this is your first late filing, you may be may be able to access for first-time penalty abatement without proving reasonable cause.

What is the difference between the filing penalty and the payment penalty?

The failure-to-file penalty (5% per month) applies if you submit your return late. The failure-to-pay penalty (0.5% per month) applies if you owe taxes and do not pay by the important date. Both can explore at the same time if you file late and owe money. Filing an extension removes the filing penalty but not the payment penalty.

Will the IRS remove the penalty if I set up a payment plan?

Setting up a payment plan does not remove the penalty, but it does reduce the failure-to-pay penalty rate from 0.5% to 0.25% per month while the plan is active. You can also request penalty relief separately by filing Form 843 or calling the IRS to explain your situation.

How long does the IRS have to collect the penalty?

The IRS generally has 10 years from the date the tax is assessed to collect the penalty and taxes owed. This period can be extended if you file an offer in compromise or enter into a payment plan, or if you move out of the country.