The consequences of filing a late tax return depend on whether you owe taxes or are due a refund. It also matters if you file your return just a few days late or several years after the return’s deadline.
Late Returns When Owed a Tax Refund
The IRS doesn’t charge any penalties to taxpayers who file late and are due a refund. However, you are essentially giving the U.S. Treasury more time to hold your money interest-free.
If enough time passes, the IRS could file a substitute return on your behalf. It’s possible that this return could have you owing taxes because the IRS doesn’t know about all of the deductions you’re entitled to.
If you still haven’t filed after three years, you have forever waived your right to receive the tax refund money for that tax return.
Late Return With a Tax Liability
You’ll face all of the following consequences when you file late and owe taxes:
- The failure-to-file penalty will be assessed every month until your return is filed.
- The failure-to-pay penalty will also be assessed every month.
- Interest will be assessed every month.
- The IRS may file a substitute return which has you owe even more taxes than you should.
There are a few different ways to avoid these consequences, depending on your reason for filing your return late.
How to Minimize Penalties and Interest
If you are filing late because you just don’t have time, request an automatic six-month filing extension. You’ll avoid the failure-to-file penalty as long as you file your return within six months.
You’ll still be charged the late-payment penalty and interest, so file your return as soon as possible to minimize these extra costs. You can also send in a payment with your extension request form, which will reduce your penalties and the tax bill you’ll have to pay when you file.
If you aren’t filing on time because you can’t pay your tax bill, think again. You’ll just be making the problem worse because you’ll still owe the taxes, but you’ll also owe even more in penalties and interest.
You can file your tax return even if you can’t pay your full bill right now. Then, contact a tax attorney to find out how to resolve your tax debt.
Get help with IRS tax debt by calling The Gartzman Law Firm at (770) 939-7710. We can listen to your concerns and help you find the best tax resolution strategy for your case.