What to Do if You File Taxes Late or Miss The Tax Deadline

Few things in life are as reliable as tax season. It rolls around each year as surely as the sun rises in the morning. And each year, a slew of self-employed people and small business owners descend into panic as they scramble to file on time. For 2023 taxes, the tax deadline is Monday, April 15, 2024. 

Now, we realize it can be difficult to meet the tax deadline set by the Internal Revenue Service—especially for self-employed individuals who often have fluctuating incomes and a million responsibilities to juggle. The good news is that you have options.

Know your options if you can’t file or pay taxes on time

If you find yourself unable to file on time, first thing first—take a deep breath.

Next, we need to differentiate between filing taxes late and paying taxes late. People often confuse these two situations. But in practice, they’re quite different. 

For example, you can file on time and still be late to pay. This is because filing an extension doesn’t actually give you more time to pay. So in other words, your specific tax situation will determine the options you have available.

When you can’t file on time

In this situation, you’re unable to file your taxes by the April 15th deadline. Again, this doesn’t necessarily mean you can’t pay the taxes—you just can’t get the paperwork together. You can end up in this situation due to poor record keeping, lack of awareness of the deadline, or simply a big rush of business. It happens. 

If this is you, you really only have two options: request an extension to file, or pay a penalty for filing late.

Option 1: Request an extension of time

Your first option is to request an extension for filing your return. This can be done either electronically or via mail, and will move your deadline from April 15 to October 15—effectively giving you six months extra to file. 

It’s important to note that getting this extension does not give you more time to pay your taxes—it only gives you more time to file. If you request an extension, you’ll need to estimate your tax bill and pay as much of that as you can by the normal deadline of April 15. 

Given that you still need to pay something by the standard IRS tax deadline, the extension option is best for individuals or businesses that have the money to pay their tax bill but won’t be able to get the paperwork together in time to file by April 15. 

If you decide you want to request an extension, you need to fill out and submit Form 4868 to the IRS by April 15. Alternatively, you can use the IRS’s Free File tool to request it. 

Option 2: Pay the late filing penalty

If you don’t file or request an extension by April 15, you’ll incur a Failure To File Penalty. This is equal to 5% of the unpaid taxes for each month or part of the month you’re late, up to a maximum of 25%. The penalty kicks in on the day your original payment was due to the IRS—not your extension due date.

Considering how simple it is to request an extension like we described above, there’s really no good reason not to go that route if your paperwork isn’t in order. It’s always good to know all your options, though.

When you can’t pay on time

If you find you can’t pay your tax bill on time—whether or not you’re able to file—you have a few more options. You can establish a payment plan with the IRS, request a hardship extension, file a Penalty Abatement Letter, or use credit to make the payment.

Option 1: Establish a payment plan installment agreement

If you miss the deadline for paying your self-employed taxes, your first option is to set up an IRS payment plan. This route is ideal if you simply don’t have the money on hand to pay your tax bill all at once—a payment plan an installment agreement that lets you chip away at the bill slowly, month by month, until it’s gone. 

You can set up a payment plan online or you can file Form 9465, which is an Installment Agreement Request. But filing online is easier and faster. You can choose between a short-term and long-term installment plan:

• Short-term payment plan: Maximum of $100,000 in combined tax, penalties, and interest. Must be paid off within 6 months.

• Long-term payment plan: Maximum of $50,000 in combined tax, penalties, and interest. Must be paid off within 72 months.

There are generally no fees associated with the short-term payment plan (but you’ll likely owe penalties). For long-term plans, the IRS charges one-time setup costs that range from $31 to over $200 depending on how you sign up and what payment method you want to use.

As with the tax extension, there’s a caveat—you may still need to pay interest or late payment penalties even though you’re on a payment plan. These will continue until the full amount is paid. 

Option 2: Request a hardship extension

If you’ve fallen into hard financial times and just can’t make your tax payment, you can consider applying for a hardship extension with the IRS. You can apply for the hardship extension by filing Form 1127. You’ll need to show that paying your tax obligation by the regular due date will cause an “undue hardship,” which the IRS defines as “more than an inconvenience” and “substantial financial loss.” 

The hardship extension extends the actual payment deadline for your taxes, and provides penalty relief from interest charges and late fees.

Hardship extension applications are reviewed on a case-by-case basis by an actual IRS officer, so there aren’t necessarily strict guidelines for what will and won’t get approved. However, you will most likely need to provide documentation supporting your claims, including a statement of assets and liabilities and an itemized list of expenses for the three months prior to the tax filing deadline.

Additionally, because of this manual review and approval process, it can take more time for a hardship extension to get approved than a standard filing extension. If you think you may need a hardship extension, you should apply as soon as possible to ensure your application gets reviewed prior to the tax deadline. 

Option 3: File a Penalty Abatement Letter

If you're facing penalties due to late tax payments, another viable option is to file a Penalty Abatement Letter with the IRS. This is a written request that explains that you acted in good faith and had reasonable cause for filing or paying late. 

When reviewing these requests, the IRS typically considers factors like natural disasters, serious illness, unavoidable absence, or significant financial hardship. Your letter should include any supporting documentation that validates your claim, such as medical records or documents of natural disasters.

If accepted, the IRS may waive or reduce the penalties associated with late filing or payment. This doesn't eliminate the need to pay your due taxes, but it can reduce the overall amount owed.

Option 4: Use credit to pay

Finally, you can opt to pay your tax bill using a business credit card or bank loan. This will trade interest and late fees from the IRS with interest to your credit card company or financial institution. But this could be a fair trade-off if you have a card with excellent bonuses or cash-back benefits. These details will vary heavily from card to card and loan to loan, and it’s also possible that your tax bill will be larger than your loan or credit limit, but it’s still an option worth exploring. 

3 ways to prevent filing taxes late in the future

If you find yourself in the position of being unable to file or pay your taxes on time, you have options. However, that doesn’t mean you shouldn’t take this opportunity to learn from your mistakes so you can prevent a similar tax situation in the future. Sometimes life throws us curve balls and there’s not much we can do about it—but often, there are things we can do to mitigate potential issues going forward.

1. Set aside money throughout the year

The single biggest thing you can do to avoid stress around your taxes is to save for estimated taxes throughout the year. This way, when tax time rolls around, you’ve already got the money for the bill. This might require a bit of adjustment in your personal or business expenses if you’re not used to saving, but the reduction in stress is definitely worth it. 

How much should you set aside? You can get a more accurate estimate by reviewing your last few tax returns, but a general rule of thumb is about 25–30% of your self-employed income. Your actual bill may work out to less than this, in which case you’ll have some extra money in the bank. 

The simplest way to get started with this type of saving is to automate it. Some banking and financial tools for self-employed people have the ability to automatically set aside money for taxes every time you receive a payment—including Found. This feature makes saving a piece of cake.

Did you know? Found has an auto-saving feature to help you save for taxes effortlessly. Try it for free today.

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2. Mark your calendar with key tax dates

Next, you should ensure you have the correct dates marked on your calendar for each tax year. In 2024, the deadline to file your 2023 taxes is April 15. If you make quarterly estimated payments, the 2024 tax filing deadlines are:  

• 1st quarter: April 15, 2024

• 2nd quarter: June 17, 2024

• 3rd quarter: September 16, 2024

• 4th quarter: January 15, 2025

Put these dates on your calendar and set reminders so you can be sure you won’t miss them. 

3. Establish a bookkeeping system

Finally, set up a reliable system to keep track of your books. If you’re late filing because you aren’t organized and had to spend time digging for receipts and papers, this will be a true life-changer. There’s no time like the present, so get started now so next year’s tax process is smoother. 

The tools you use here matter a lot. The best accounting apps tie directly to your bank account to track transactions and automatically file them in the proper category, so all you need to do is print your reports and you’re ready to file.

Learn more: How to calculate your taxable income

Frequently asked questions about filing taxes late

What happens if you don't file taxes by April 15?

If you don't file your taxes by the tax filing deadline, you may face a failure-to-file penalty, typically 5% of the unpaid taxes for each month or part of a month your return is late, not to exceed 25%.

Can I still file my taxes after the deadline?

Yes, you can. But if you owe taxes, you may be subject to late filing and payment penalties. Filing as soon as possible will limit interest and other penalties.

What happens if you file taxes late but don't owe anything?

If you file late but don’t owe any taxes, generally, there's no penalty. But you should still file as soon as possible to claim any refunds or credits. You have three years to claim a refund before you lose it. 

Do I have to file taxes if I don't owe anything?

You may still need to file taxes even if you don't owe the IRS money, especially if you had income tax withheld or are eligible for tax credits. Not filing could mean missing out on potential refunds. It’s also difficult to know how much tax you owe without filing your return first, so filing is always a good idea just to be sure.

Can I skip a year filing taxes?

Skipping a year of filing taxes isn’t recommended, even if you think you don't owe any taxes. Not filing can lead to penalties, missed refunds, and complications with the IRS.

What is a substitute return?

A substitute return from the IRS is a federal income tax return that the IRS files on your behalf if you don’t file and have a tax liability. The IRS creates the substitute return using third party information from employers and banks. The substitute return may not include all the self-employed tax deductions you’re eligible for, which can result in a higher tax bill for you. If you get a notice about a substitute return, file your own tax return as soon as possible. Also, if you notice any income is incorrect, submit a corrected form.

How much of my Social Security can the IRS take for back taxes?

The IRS is legally allowed to take up to 15% of your Social Security benefits for back taxes until you pay off your total tax debt. Likewise, if you’re self-employed and owe taxes, the IRS will withhold the portion of your self-employment tax that gets sent to Social Security, which will decrease the amount of credits you earn through the system. 

Make tax time less stressful with Found

If you can’t file your taxes on time, relax—there are ways to minimize the consequences. You can request a filing extension, set up a payment plan, or apply for a hardship extension. None of these options are perfect, but they’ll all help give you a bit more time to get your taxes together and get straightened out for the next year.

If you want to avoid these types of issues entirely, check out Found. Our tax tools can simplify filing and help you focus on what matters—like autosave, which automatically sets aside money from each payment for taxes. Sign up for Found today.

The information on this website is not intended to provide, and should not be relied on, for tax advice.

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