With Tax Day on the horizon, countless Americans are busy preparing their tax returns. However, failing to meet the April 15 deadline could lead to a series of penalties and accumulating interest charges.
For those who owe taxes, submitting a return late can result in significant costs, including hefty monthly fees and daily interest that can escalate rapidly.
Significance of Timely Filing
The Internal Revenue Service (IRS) enforces both failure-to-file and failure-to-pay penalties, which are assessed based on the unpaid tax balance. These fees are designed to discourage late filing.
Approximately 43 million individuals procrastinate and file their taxes in the last three weeks leading up to the deadline, as per an NBC News review of IRS statistics.
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Important Information
The IRS automatically assesses penalties when tax returns or payments are not filed on time without an authorized extension. The penalty for failure-to-pay is 0.5 percent of the unpaid taxes each month, with a maximum cap of 25 percent.
These fees aim to motivate timely tax compliance; however, for those in unexpected situations, they can exacerbate financial stress. Taxpayers should be aware of the potential financial consequences and options available if they are unable to file or pay on time.
What is the tax filing deadline?
For the majority of taxpayers, the deadline for filing 2024 income taxes is April 15. Those who request an extension can submit their returns by October 15. To obtain an automatic six-month extension, one must file Form 4868 by the April 15 deadline.
Importantly, the IRS clarifies that an extension to file does not equate to an extension to pay. Any taxes owed must still be paid by the April deadline, regardless of an extension being granted.
“You can avoid a penalty by filing and paying your taxes by the due date. If you’re unable to do so, you have the option to request an extension to file or establish a payment plan,” the IRS advises on its website.
How can I speed up my tax filing?
Eligible taxpayers can utilize IRS Free File for straightforward returns or opt for electronic filing with commercial tax software like TurboTax.
Choosing direct deposit is advisable for receiving refunds quickly.
Paying as much of the owed tax as feasible by the original deadline can help minimize future penalties and interest charges. If paying the full amount isn’t possible, arranging an installment agreement with the IRS can also help lower penalty rates.
What are the penalties for late tax filing?
If a return is submitted after April 15 without an approved extension and the taxpayer has a balance due, the failure-to-file penalty is activated immediately at 5 percent of the unpaid taxes for each month the return is late, capped at 25 percent.
If the return is over 60 days late, the IRS enforces a minimum penalty of either 50 or 100 percent of the tax owed, whichever is less.
Taxpayers who owe money and fail to pay by the deadline will incur a separate failure-to-pay penalty of 0.5 percent per month. If both penalties apply in the same month, the failure-to-file penalty is reduced to 4.5 percent, following IRS guidelines.
How much interest will accumulate?
Interest begins accruing the day after the tax deadline on any outstanding balance.
The current interest rate, adjusted quarterly, is the federal short-term rate plus 3 percent, compounded daily. As of early 2025, this rate is 7 percent.
While the IRS can waive penalties in cases of reasonable cause or first-time offenses, interest charges cannot be waived unless the related penalty is also removed. Taxpayers seeking relief must provide appropriate documentation and a written explanation for assessment.
The IRS encourages taxpayers to pay what they can by the deadline, even if they cannot pay the full amount, as partial payments lower the total balance subject to penalties and interest.
Payment plans and assistance options are available on the IRS website and through certified tax professionals.
Insights from Experts
Kevin Thompson, CEO of 9i Capital Group and host of the 9innings podcast, told Newsweek: “Even if you file for an extension, that 0.5 percent penalty continues to accrue if you don’t pay what you owe. The silver lining? If you file on time and establish a payment plan, the failure-to-pay penalty drops to 0.25 percent per month. The bottom line—file something. Pay something. Don’t delay.”
Alex Beene, a financial literacy instructor at the University of Tennessee at Martin, stated to Newsweek: “It’s crucial to submit your tax information by or before April 15th, and if unforeseen circumstances will delay this, have a plan for extensions that outlines a timeline for your completion to the IRS. While the penalty for missing the annual deadline is relatively minor depending on the amount owed, it can substantially reduce your refund.”
Michael Ryan, a finance expert and founder of MichaelRyanMoney.com, shared with Newsweek: “Extensions are extremely beneficial. You receive until October 15th to file, and they’re automatically granted once you request one. The catch? The extension grants you extra time to file the paperwork but not to pay. You still need to estimate what you owe and pay it by April 15th to avoid those costly penalties.”
Next Steps
While penalties are unavoidable for those who owe taxes to the U.S. government, it is essential for Americans to file to ensure they do not forfeit potential refunds, which can expire after several years.
“If the IRS owes you money, there’s no penalty for filing late. They’re quite happy to keep your money without interest,” Ryan noted. “Yet, don’t procrastinate indefinitely. You have until April 15, 2028, to claim your 2024 refund. After that date, your money effectively becomes a ‘donation’ to the U.S. Treasury.”
