What Happens If You File Taxes Late & Owe Money?

Taxpayers are not subject to penalties for filing a late income tax return if they do not owe tax. However, taxpayers who file a late return and owe tax will be assessed penalties and interest from the day the return was due (usually April 15th). 

The two most common penalty assessments are for failing to file a tax return or for failing to pay the tax by the deadline. 

The failure to pay penalty is one-half percent of the unpaid tax for each month the tax is late and the failure to file penalty is 5 percent for each month the tax is late. 

Additional interest charges accrue on the unpaid penalty and tax on a monthly basis using the federal short term rate plus three percent. 

The IRS may waive penalties if you have a reasonable cause for filing late. Acceptable reasons for untimely filings include, but are not limited to, overseas travel, illness, military service and incarceration. Complete IRS Form 843 and mail it to the office which processes returns for your area to request that your penalties be removed. 

If you do not pay or make arrangements to pay the tax owed, the IRS may issue a lien on your assets. The lien will be issued if you fail to pay the tax owed within 10 days of the date listed on the IRS notice advising you of the outstanding amount. 

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