Late Tax Filing Consequences: What Happens If You Miss the Deadline?

Tax Day, or the deadline for filing your 2020 federal income tax return, falls on May 17 this year. But what happens if you miss this deadline and file your tax return late?

As you navigate taxes, you can get familiar with tax-filing essentials in Personal Capital’s free Guide to Filing Your Taxes in 2021.

Can You File for an Extension?

If you think there’s a chance that you might miss the tax-filing deadline, you should file for a deadline extension. This will automatically give you until October 15, 2021, to file your taxes. However, you must file an extension before May 17 — if you wait until after this date it will be too late to receive an extension.

To file for an extension, complete IRS Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return.

Note that while filing for an extension will give you more time to file your federal tax return, it does not give you more time to pay your taxes if payments are due. If you think you might owe taxes this year instead of receiving a refund, you should estimate how much you’ll owe and send this amount in with Form 4868.

What Happens If You File Late?

If you miss the tax-filing deadline and are due a tax refund this year, then there will be no penalty associated with filing late — even if you don’t file for an extension. Your only “penalty” would be a delay in receiving your refund. You have up to three years from the tax-filing deadline to file your return and receive your refund.

But it’s a different story if you owe taxes and miss the tax-filing deadline. In this scenario, you will be assessed penalties for failing to file your return on time and failing to pay your taxes on time. The failure to file penalty is 5% of the unpaid tax per month, plus interest, with a maximum penalty of 25% of the unpaid tax. 

The late payment penalty is 0.5% per month (or a fraction thereof) of the unpaid tax until the tax is paid in full, plus interest, also with a maximum penalty of 25%.  The IRS can collect back taxes for ten years from the date the taxes were assessed.

What If You Can’t Pay?

There are three main options if you can’t pay the amount of tax you owe.

1. Pay it using a credit card. The IRS accepts credit cards as payment for taxes due. Keep in mind, however, that if you can’t pay your credit card balance in full when the bill comes due, you could end up paying high interest rates that significantly increase the amount of tax that you end up paying.
2. Pay it in installments. You’ll attach IRS Form 9465 to your tax return to request an installment agreement and monthly payment plan for the payment of your taxes. If you owe more than $10,000, the IRS may want to review your personal finances (such as your assets, liabilities and cash flow) before agreeing to a payment plan. 

Tip: Get a handle on your money with Personal Capital’s free financial dashboard. You get a quick overview of your net worth, cash flow, investment allocation, and more. You can also plan for long-term goals like funding a child’s education or retiring.