What to Do if You Can’t File Your Taxes on Time

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 2022 taxes, the tax deadline is April 18, 2023—a few days later than the standard April 15th. 

Now, we realize it can be difficult to meet the IRS’s tax deadline—especially for self-employed individuals who often have fluctuating incomes and a million responsibilities to juggle. Fortunately, you have options.

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

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

Next, we need to differentiate between being late to file and being late to pay. These two situations are often confused, but in practice, they’re actually quite different. You can file on time and be late to pay, for example, and a filing extension doesn’t actually give you more time to pay. In other words, your specific 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 18th 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

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 18th to October 16th—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 18th. 

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 18. 

If you decide you want to request an extension, you need to fill out and submit Form 4868 to the IRS by April 18th. 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 18th, you’ll incur a late penalty for filing taxes past the deadline. This is equal to 5% of the unpaid taxes for each month you’re late, up to a maximum of 25%.  

Considering how simple it is to request an extension like we described above, there’s really no 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, or use credit to make the payment.

Option 1: Establish a payment plan

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 gives you the ability to chip away at the bill slowly, month by month, until it’s gone. 

You can choose between a short-term and long-term payment 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 (beyond the standard late payment fees). The long-term plan has some 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 extension, there’s a caveat—you may still need to pay interest late 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 bill 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 you will be able to avoid interest 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 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 April 18th tax deadline. 

Option 3: Use credit to pay

Finally, you can opt to pay your tax bill using a business credit card. This will trade interest and late fees from the IRS with interest to your credit card company, which can actually be beneficial—some cards have excellent bonuses or cash-back benefits. These details will vary heavily from card to card, and it’s also possible that your tax bill will be larger than your credit limit, but it’s still an option worth exploring. 

3 ways to prevent filing 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 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 set aside money for them 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.

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 2023, the deadline to file your 2022 taxes is April 18. If you make quarterly estimated payments, the 2023 tax deadlines are:  

• 1st quarter: April 18th, 2023

• 2nd quarter: June 15th, 2023

• 3rd quarter: September 15th, 2023

• 4th quarter: January 17th, 2024

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.

Make tax time less stressful with Found

If you can’t file your taxes on time, relax—you have options. 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, and you can save up to $50 when you file your self-employed taxes through TurboTax this year. Restrictions may apply. See here for Turbo Tax terms.

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