The unthinkable happened. Normally you’re a planning machine, but this year the months just got away from you. You missed the tax deadline. Now what? You don’t know anyone who hasn’t filed or paid their taxes on time, so you’re in uncharted territory here. Luckily, you have us to help you navigate the new waters.
You’re imagining a SWAT team of IRS agents bursting through your front door, dragging you into an unmarked black car and refusing to let you out of custody until they get their money — but that’s far from the reality of what happens if you missed the tax deadline. So go ahead and let out a small sigh of relief. There will be consequences — this is the government, after all — but rest assured that there’s no front door replacement in your future.
I missed the tax deadline. Now what?
It goes without saying, but first things first: Get your forms filled out and filed ASAP. As in, before you read the rest of this article if it’s at all possible. At the very least, go through the (very easy) process of filing for an extension and remember to pay the government what you owe. Expecting a return? All the better, since it means you don’t have to worry about that part.
Now onto business. There are four types of penalties the government can leverage against you if you missed the tax deadline: failure to file, failure to pay, failure to pay proper estimated tax and dishonored check. And yes, unfortunately, they can slap you with more than one penalty. We’ll explain them below so you understand what might happen:
Failure to pay penalties
We’ve said it before, but we’ll say it again: the government is all about that cash money, honey. If you filed your tax return — or, most likely — turned in the paperwork filing for an extension but didn’t hand over a check for the money you owe the government, you’re going to face a fine.
What does that look like exactly? Well, you can expect to be charged 0.5% a month on your unpaid taxes ... plus interest. The penalty and interest will be applied every single month you have not paid your outstanding taxes, and the IRS counts fractions of months as entire months when it comes to settling the final bill.
But make sure you check how much of your outstanding bill you paid even if you did hand over some cash to the government. In order to not get these fees and their interest leveraged against you, you need to have paid 90% of what you owe. If you paid them, but only 70%, you’re still going to get fined, so it’s worth a paranoid check.
Failure to pay proper estimated tax
It sounds similar to the penalty above, but trust us, it’s a different fee entirely. If you expect to owe the government more than $1,000 in taxes, you need to make a payment for the estimated amount. (This is generally calculated through Form 2210.) Freelancers, you’re probably familiar with this concept.
You have multiple chances to get fined here because estimated taxes are divided into four payment periods per year. Read up on the ins and outs of estimated taxes here with resources from the IRS. The penalties for this one are calculated separately for each payment period, so you could get between one and four different fees added to your bill, depending on how many deadlines you missed. Oh yeah, plus interest.
Failure to file penalties
We’ll start with the good news: If you’re owed a tax refund from the government and you forgot to turn in your tax paperwork, you’re not going to face any fine. Just get those documents filed ASAP. And remember to check if you’re eligible to file taxes for free; around 70% of taxpayers are eligible according to the IRS, but few know about or take advantage of this service.
If you do owe money, however, there is a penalty for filing late. This penalty amounts to 5% of your unpaid tax every month, and if you file in the middle of a month it counts as a whole month. The sort of silver lining here (depending on how much you owe) is that this charge will only accrue for up to 5 months, meaning the penalty is capped at 25% of the unpaid amount.
But — again, go file now if you haven’t already — you’re going to face more fines if you file more than 60 days late. In that case, you’ll be slapped with a minimum charge of $205 or 100% of the unpaid tax, whichever is less. Add this to any penalties you face for failure to pay, and you start looking at a larger number. So get going already.
This one is remarkably straightforward for the IRS. If your bank refuses to honor the check you gave to the government to cover your taxes, they’re going to fine you because (again) they didn’t get their money at the right time. But the penalties are quick and easy to figure out: If your check amount was for $1,250 or more, you’ll see a penalty of 2% of the amount of the payment; If that amount was for under $1,250, you’ll see a penalty of the amount of the payment or $25, whichever is less.
What if I missed the tax deadline but disagree with my penalties?
You can call the IRS to dispute a penalty, though there’s no guarantee of it being retracted. You can call 1-800-829-1040, which is also the number on the paperwork the IRS sends you through the mail. Have all your paperwork ready when you call them, and read more about the details of the IRS penalties here.