There are plenty of possible reasons why you may want to file your taxes late. It may be getting close to the tax deadline, but you realize you’ll need more time to handle the logistics of filing, or perhaps, you’re an investor waiting on a K-1.
Many people file their taxes late each year, and even if you’re one of them, there’s no need to worry, but to make sure you minimize any penalties and interest, here are a few things to keep in mind:
1. File an Extension
Ordinarily, if you don’t file your taxes by the deadline, the IRS will assess a failure-to-file penalty worth 5% of your unpaid taxes every month your return is late. The total penalty won’t exceed 25% of your total taxes owed, but thankfully, you can avoid these charges through an extension, which you can file for by submitting Form 4868.
If you have an existing payment plan with the IRS, filing for an extension is easier, as, through the DirectPay system, you can make a payment (the estimated amount of taxes you will owe, or at least what you can pay at the moment) and make a note that it is for a tax extension.
There’s a common misconception that the extension gives you extra time to both file and pay your taxes, but if you receive an extension, you only get an extra six months to file. The IRS will still expect you to pay anything you owe (or at least an estimate of what you owe) by the tax deadline.
Even if you anticipate getting a tax refund instead of owing taxes, filing for an extension is still a good idea. If you make an error and owe something to the IRS, having an extension will save you from the failure-to-file penalty.
2. Pay Your Taxes as Soon as Possible
Even if you’ve filed an extension, you will likely have to pay a penalty for paying your taxes late. The penalty isn’t exorbitant — often about 0.5% of your total balance due for each month that you’re late — but if you have what the IRS deems “a reasonable explanation” for paying late, the penalty can be waived altogether.
Note, however, that the late payment fee differs from the 5% failure-to-file penalty mentioned above. If you don’t file an extension, you’ll owe the 5% failure-to-file penalty on top of the 0.5% failure-to-pay penalty.
3. Set Up a Payment Plan if You Can’t Pay Right Away
Many people simply aren’t able to pay the taxes they owe right away. If you run into such a scenario, apply for a payment plan with the IRS right away, through which you’ll pay a portion of the taxes owed every month instead of paying the total amount all at once. The IRS also notes that, in most cases, setting up a payment plan can reduce future penalties.
If you apply for a payment plan online, the setup fees will generally be lower, though you can also apply by phone, by mail, or even in person.
4. Don’t Forget About the Deadline
With an extension, your return will be due six months after the regular tax deadline. For 2023, that makes the extended deadline October 16, 2023. If you have an extension and file after October 16, the IRS can still assess the 5% late-filing penalty for every month (or partial month) your extended return is late.
Of course, if possible, it’s a good idea to file and pay before October, as doing so can reduce your late payment penalty. Additionally, if you find that your tax file is missing something or run into any other issues with filing, you can address them before the deadline.
Don’t Be Afraid to Ask for Help
The logistics of filing your taxes late can be challenging, and figuring out how to calculate and pay your tax bill, or even learning how to file an extension, can be deceptively difficult. Tax professionals need to stay in business, after all.
Nevertheless, you don’t have to learn how to file late alone. For older adults or anyone facing difficulties with filing, there are resources available to help you.
