Updated for tax year 2023.
If you missed the deadline for filing taxes and have yet to file your 2023 federal income tax return, it’s important to file before June 14, 2024, to avoid higher penalties. The penalties and interest charged by the Internal Revenue Service (IRS) can accumulate quickly after the tax deadline passes — keep reading to learn how to minimize them.
IRS penalties for late filing and late payment
The IRS charges late filing penalties when taxpayers fail to file their tax returns by the due date or pay their taxes on time. The failure-to-file penalty is normally 5% of the unpaid tax, for each month or part of a month that a tax return is late. The penalty won’t exceed 25% of your unpaid taxes. Once you file, this penalty stops accruing. However, if your tax return is more than 60 days late, the minimum failure-to-file penalty is $485 or 100% of the tax due, whichever number is lower.
In addition to the failure-to-file penalty, the IRS also charges a failure-to-pay penalty, which is 0.5% of the unpaid taxes for each month or part of a month that the tax remains unpaid. Like the failure-to-file penalty, the late payment penalty cannot exceed 25% of your tax due.
Combined penalties
When you fail to file your tax return or fail to pay your taxes, the IRS imposes penalties. If both penalties apply in the same month, the failure-to-file penalty is reduced by the amount of the failure-to-pay penalty. This results in a combined total penalty of 5% for each month or part of a month that your return was late.
For example, let’s say you were subject to a 5% failure-to-file penalty and a 0.5% failure-to-pay penalty. In this case, the IRS would apply a 4.5% failure-to-file penalty and a 0.5% failure-to-pay penalty.
Payment options
Even if you can’t pay your tax bill in full, you should still file your income tax return as soon as possible. Doing so can reduce late filing penalties. You can also consider applying for an IRS payment plan, which allows you to break up your tax payments into more manageable monthly payments. The agency provides short-term plans (180 days to pay in full) and long-term plans (up to 72 months) based on your tax type and the amount owed. Certain payment plans can be set up online without the need to contact the IRS. TaxAct® can also help you set up an IRS payment or installment plan when you e-file with us.
Tax penalty abatement and special circumstances
If you have a valid reason for not filing on time, you may qualify for penalty relief. For instance, first-time abatement is available for those who have filed and paid on time without any penalties for the past three years. This allows American taxpayers to request a reduction or waiver of penalties; however, interest charges are not eligible for abatement under this program. Even if you don’t qualify for first-time abatement, you may still be able to get penalty relief if your reason for filing or paying late was due to reasonable cause.
Special filing deadlines also apply if you reside outside the U.S., serve in the military abroad, and or live in a federally declared natural disaster area.
If you receive an IRS notice detailing penalties for late filing or late payment, be sure to read it carefully and follow the instructions to request penalty relief if necessary.
Extensions and online resources
If you filed a tax extension, you will have until October to file your tax return. It’s important to note that any tax liability owed for the 2023 tax year was still due by the original due date, April 15, 2024. To get more information about your tax situation, you can access your federal income tax account online through the IRS website. This allows you to review your tax records, make or view payments, and set up payment plans.
The bottom line
Be sure to file your taxes by June 14 to avoid additional late filing penalties. Filing as soon as possible and paying what you can help minimize potential penalties. Filing electronically is the fastest way to get your taxes to the IRS. Our tax software can help you e-file your federal tax return quickly and securely, and we can also help you request an IRS payment plan if necessary.