Haven’t yet filed your 2022 taxes? Now is your chance. If you missed the April 18 tax deadline to file your 2022 federal income tax return and pay any tax, you should take action by June 14, 2023, to avoid a larger late-filing penalty.
Here’s how that works. The IRS typically assesses a penalty when you owe taxes or haven’t filed a tax return. Interest also accrues on unpaid balances—as well as penalties (yes, the IRS charges interest on penalties).
Normally the failure-to-file penalty is 5% of the unpaid tax, up to a maximum of 25 percent for each month or part of a month that a return is late. Once you file, the penalty will stop accruing.
If your return is more than 60 days late, the minimum failure-to-file penalty is $435 or 100% of the tax due, whichever is less.
To avoid paying the bigger penalty, the IRS must receive your tax return by June 14. To ensure timely filing, the IRS recommends that taxpayers file electronically.
If you don’t pay the tax you owe, you can be subject to a failure-to-pay penalty. The failure-to-pay penalty is 0.5% of the unpaid taxes for each month or part of a month the tax remains unpaid. As with the failure-to-file penalty, the failure-to-pay penalty won’t exceed 25% of your tax due.
If both kinds of penalties—failure-to-file and failure-to-pay—apply 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. So, for example, if you were subject to the 5% failure-to-file penalty and the .5% failure-to-pay penalty, the IRS would apply a 4.5% failure-to-file penalty and a 0.5% failure-to-pay penalty.
If, after five months, you still haven’t paid, the failure-to-file penalty will max out, but the failure-to-pay penalty will stick around until the tax is paid in full, up to its maximum of 25% of the unpaid tax as of the due date.
Don’t have the money to pay? To reduce penalties, file your tax return as soon as possible, even if you can’t pay the tax due.
If you can pay some part of what you owe, but not all at once, consider applying for a payment plan. The IRS has both short-term (180 days to pay the balance in full) and long-term payment plans (up to 72 months) available. Depending on the type of tax and amount owed, you may be able to set one up online, without ever talking to an IRS representative.
If you have a good reason for not filing on time, you may be entitled to some penalty relief. Taxpayers who have filed and paid on time and have not been assessed any penalties for the past three years may qualify for the first-time abatement program.
You can request first-time abatement even if you haven’t fully paid the tax on your return. However, the failure-to-pay penalty will apply until you pay the tax in full.
This relief only applies to penalties. By law, the interest is not eligible for abatement under the first-time abatement program.
Some taxpayers get more time to file, even if they didn’t request an extension. For example, a June 15 filing deadline applies to taxpayers who have their tax home and abode (tax speak for residence) outside the U.S. or Puerto Rico or those who are serving in the military outside the U.S. and Puerto Rico on the regular due date of their tax return—that’s typically April 15 (it was April 18 this year). Special rules also apply to certain members of the military. You can find out more here.
The IRS automatically provides filing and penalty relief to taxpayers with an IRS address of record located in a federally declared disaster area when at least one area qualifies for the Federal Emergency Management Agency’s Individual Assistance program. Ordinarily, this means that taxpayers need not contact the IRS to get disaster tax relief. Sometimes, those special declarations can go a little wonky, as they did for California taxpayers this year—you can read more here about what to do if you erroneously received a CP14 notice when you are entitled to additional relief.
Some taxpayers may not need to file until October because they requested an extension to file their returns. Remember that an extension to file is not the same as an extension to pay—if you owed tax for the 2022 tax year, the payment was due on April 18, 2023. If you haven’t paid, consider doing it now to mitigate any penalty.
Not sure what you owe—and don’t want to pick up the phone? Don’t forget that you can check your federal income tax account online. Click over to the IRS website to check your tax record, make or view payments, or set up a payment plan.