What Is the Penalty for Failure to File Taxes?

There are penalties for failing to file a tax return or pay a tax bill. Here's how they work and how to avoid them.
What's the Penalty for Failure to File Taxes?

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What is the penalty for not filing taxes?

The penalty for not filing taxes is also known as the failure-to-file penalty or the late-filing penalty.

Internal Revenue Service. Failure to File Penalty. Accessed Apr 15, 2022.

  • The penalty is usually 5% of the tax owed for each month or part of a month the return is late.

  • The maximum failure-to-file penalty is 25%.

  • If your return is more than 60 days late, the minimum penalty for not filing taxes is $435 or the amount of tax owed, whichever is smaller.

There is good news, though. You might not owe the penalty if you have a reasonable explanation for filing late.

Internal Revenue Service. Penalty Relief Due to Reasonable Cause. Accessed Apr 15, 2022.
The IRS has more information on how to apply for penalty relief here.

One important distinction: The late-filing penalty is not the same as the late-payment penalty. The late-filing penalty affects people who don’t turn in their Form 1040 and other important tax documents on time. The late-payment penalty affects people who pay their taxes late. It is 0.5% of your unpaid taxes for each month your outstanding taxes are unpaid. Plus interest.

The failure-to-file penalty usually doesn’t apply if you’re due a refund

If the IRS owes you money, and you haven’t filed a tax return to claim it, get cracking! You typically have just three years to claim a tax refund. There is usually no penalty for failure to file if your tax return results in a refund.

How to avoid a failure-to-file penalty

If you’re going to miss the tax-filing deadline, help yourself avoid the penalty for not filing taxes by getting an extension to file your tax return. A tax extension can get you an extra six months to get your tax return to the IRS.

Remember, however, that a tax extension only gets you more time to file your tax return. It does not get you more time to pay your taxes. Some people, such as natural disaster victims, certain members of the military or Americans living overseas, may automatically get more time to file.

If you miss the tax extension deadline, though, that failure-to-file penalty could come back to haunt you.

If you’re trying to see how long can you go without filing a tax return

It’s a risky proposition. While the government usually has just six years to charge you with criminal tax evasion, it has forever to collect the taxes you owe and assess penalties. In addition to the failure-to-file penalty, these things could happen to you when the IRS catches up to you:

  • Failure-to-pay penalty: If you don’t pay the taxes you owe by the deadline, the IRS can penalize you 0.5% of the unpaid balance every month, up to a total of 25%.

    Internal Revenue Service. Failure to Pay Penalty. Accessed Apr 15, 2022.

  • Interest: On top of the failure-to-pay penalty, interest accrues on your unpaid taxes.

  • A substitute return: If you fail to file but the IRS has some information needed to calculate your taxes, such as your W-2 form, you may be notified by mail that it has filed a return on your behalf. It won’t consider the tax credits, deductions or other tax breaks you may have taken if you’d done your taxes.

  • Lost refunds: You may be missing out on money you’re owed. In most cases, the IRS gives you a three-year window to file previous years’ returns.

    Once this window closes, you forfeit your tax refund.

  • Federal: $24.95 to $64.95. Free version available for simple returns only.

  • State: $29.95 to $44.95.

  • All filers get access to Xpert Assist for free until April 7.

Promotion: NerdWallet users get 25% off federal and state filing costs.

  • Federal: $39 to $119. Free version available for simple returns only.

  • State: $49 per state.

  • TurboTax Live packages offer review with a tax expert.

Promotion: NerdWallet users can save up to $15 on TurboTax.

  • Federal: $29.99 to $84.99. Free version available for simple returns only.

  • State: $36.99 per state.

  • Online Assist add-on gets you on-demand tax help.

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