Please ensure Javascript is enabled for purposes of website accessibility

What Happens If My Tax Return Is Late?

By Maurie Backman - Updated Apr 5, 2017 at 2:13PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Owe the IRS money? Here's why being late could really hurt you.

It's estimated that 7 million taxpayers fail to file a tax return each year. While getting a tax return in late is better than neglecting to file one at all, it's still far from ideal. If you're approaching the upcoming federal deadline feeling completely unprepared, you may be wondering: What happens if I'm late filing my taxes? The answer to that question, though, depends on whether you owe money on your taxes or not.

Penalties for filing a tax return late

If you don't owe the IRS money and are late submitting your tax return, here's some good news: You won't face a penalty for filing your taxes past the deadline. But if you do owe the IRS money, it's a whole different story. Miss the deadline, and you'll face a late filing penalty equal to 5% of your unpaid tax bill for every month (or partial month) your return is late, up to a maximum of 25% of what you owe. That penalty will start to accrue the day after the tax filing deadline, which, for this year, is April 18, so if you owe a lot of money, being even a few days late could cost you. Furthermore, if you owe money and file your return more than 60 days after the deadline, you'll face a minimum penalty of $135 or 100% of your unpaid tax bill -- whichever is smaller.

Tax forms, glasses, and calculator

Image source: Getty Images.

Keep in mind that the late filing penalty can be far worse than the late payment penalty --10 times worse, in fact. If you file your return on time but can't pay off your tax bill in full (or at all), you'll face a penalty equal to 0.5% of what you owe for every month your taxes go unpaid, up to a maximum of 25%. So if, for example, you owe $5,000 in taxes and file a return on time but don't pay your bill for six months, it'll cost you $150 in penalties. However, if you owe $5,000 and don't pay or file a return for six months, it'll cost you $1,500. Ouch.

Requesting a tax extension

While filing a tax extension won't give you more time to pay your taxes, it will give you additional time to get them submitted, thus avoiding the higher failure-to-file penalty. If you don't have your taxes ready in time for the April 18 deadline, be sure to request an extension by that date. The IRS typically grants extensions automatically, and that will buy you an extra six months to get your paperwork in order.

Now if you're reading this after the April 18 deadline and are sitting on an unfiled return, your next best bet is to file your taxes as soon as you can and starting making payments on what you owe (or, if possible, pay off your balance immediately). If you need to request a payment plan, you can do so online provided you owe less than $50,000.

Late tax returns and refunds

While there's no penalty for filing a late tax return if you're due a refund, the longer you delay, the longer the IRS gets to keep your hard-earned cash. Now you technically have three years past the tax filing deadline to submit a return for any given year and claim an associated refund, but if you're owed money, you have nothing to gain by procrastinating. As an example, say you're owed $1,000 and you sit on that tax return for three full years. Had you collected that money up front and put it in a savings account paying minimal interest, you would've earned $30 on that refund -- not a life-changing amount, but a useful chunk of cash nonetheless.

Being late with a tax return could have serious consequences if you owe the IRS money, so if you don't think you'll make the deadline, take a few minutes out of your day to file for an extension. Otherwise, the IRS will be more than happy to capitalize on your poor planning by collecting its penalties.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 06/30/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.