What Happens if I don’t file and pay my taxes on time?

Who is affected: Everyone that is required to file a tax return.

If you owe tax and don’t file an extension, you are subject to a f Failure to File Penalty. Here is how that is calculated:

  • The Failure to File Penalty is 5% of the unpaid taxes for each month or part of a month that a tax return is late. The penalty won’t exceed 25% of your unpaid taxes.
  • If both a Failure to File and a Failure to Pay Penalty are applied in the same month, the Failure to File Penalty is reduced by the amount of the Failure to Pay Penalty for that month, for a combined penalty of 5% for each month or part of a month that your return was late.
  • If after 5 months you still haven’t paid, the Failure to File Penalty will max out, but the Failure to Pay Penalty continues until the tax is paid, up to its maximum of 25% of the unpaid tax as of the due date.
  • If your return was over 60 days late, the minimum Failure to File Penalty is $435 (for tax returns required to be filed in 2020, 2021 and 2022) or 100% of the tax required to be shown on the return, whichever is less.

If you don’t pay the amount shown as tax you owe on your return, the Failure to Pay Penalty is calculated in this way:

  • The Failure to Pay Penalty is 0.5% of the unpaid taxes for each month or part of a month the tax remains unpaid. The penalty won’t exceed 25% of your unpaid taxes.
  • If both a Failure to Pay and a Failure to File Penaltyare applied in the same month, the Failure to File Penalty will be reduced by the amount of the Failure to Pay Penalty applied in that month. For example, instead of a 5% Failure to File Penalty for the month, the IRS will apply a 4.5% Failure to File Penalty and a 0.5% Failure to Pay Penalty.
  • If you filed your tax return on time as an individual and you have an approved payment plan, the Failure to Pay Penalty is reduced to 0.25% per month (or partial month) during your approved payment plan.
  • If you don’t pay your tax in 10 days after getting a notice from the IRS stating its Intent to Levy, the Failure to Pay Penalty is 1% per month or partial month.
  • Full monthly charges are applied, even if you pay your tax in full before the month ends.

But wait, there’s more…

There is interest charged in addition to penalties and interest is charged on penalties as well. The date from which interest is charged varies by the type of penalty. Interest increases the amount you owe until your balance is paid in full.