Here's What Happens When You're Late With a Tax Return

This year, tax returns were due on April 18. But what if your 2022 tax return never made it to the IRS? 

Perhaps you've had an extremely busy spring at work and never got around to tackling your taxes. Or maybe you've been putting off your filing because you're convinced you'll need to send the IRS a check and you know you can't afford a giant tax bill.

Being late with a tax return is apt to hurt you financially one way or another. The only difference is that if you owe money on your taxes and are late, the IRS will penalize you. If you're owed money and are late, you'll be penalizing yourself.

When you underpaid your taxes and are late

When you have a balance due to the IRS for underpaying your taxes and you're late with a return, you could be penalized pretty harshly by the agency for your tardiness. The IRS will impose a failure-to-file penalty equal to 5% of the tax bill you owe for every month or partial month your return is late, up to 25%. 

So, let's say you owe the IRS $2,000 from 2022 and are two months late submitting your tax return. That means you're looking at a penalty of $200, not to mention interest on your unpaid tax bill. 

When you're owed money and are late

The IRS isn't going to penalize you for submitting a tax return late if you're owed a refund. After all, the longer it takes you to request your refund, the longer the IRS gets to hang onto your money without owing you interest. That's a pretty good deal. 

You should know that you have three years past a given return's due date to submit it and request an associated refund. So for 2022 tax returns, you have until April 2026 to get your return to the IRS, since that's three years from the April 2023 deadline.

But let's imagine the IRS owes you $2,000. Wouldn't you rather see that cash hit your checking account sooner rather than later?

In fact, imagine you keep putting off your tax return because you don't want to deal with it and you know there's no penalty involved. What if you encounter a $2,000 home repair you're forced to charge on a credit card and pay interest on in the absence of having the cash? That's silly when the IRS is sitting on $2,000 of yours, and all you need to do to get it is file your tax return.

It pays to be timely with your taxes

Whether you owe the IRS money or it owes you, it's a good idea to file your tax return on time. Being late is apt to hurt you financially one way or another, so why subject yourself to penalties or a delayed refund?

That said, you may have no choice but to file a tax return late due to not having received all of your tax forms on time. In that case, at the very least, make sure to request a tax extension, which will give you six extra months to submit your return. 

An extension won't get you out of paying your tax bill by the filing deadline, and you'll accrue interest and penalties if you owe money and don't pay on time. But it will help you avoid the above-referenced failure-to-file penalty if you owe the IRS money and submit your return past the deadline.