Tax season can feel like a maze, and it’s easy to take a wrong turn. Maybe you missed the deadline, entered the wrong numbers, or forgot to file altogether. So, what happens when tax filing goes off track? More importantly, what can you do about it?
In this blog, we break down the consequences of incorrect or late tax filing, explore potential penalties and interest, and offer actionable steps to help you avoid deeper trouble with the IRS.
Key Takeaways
- Filing late or incorrectly can result in serious penalties, including up to 5% of unpaid tax per month.
- Interest accrues daily on unpaid taxes until they are fully paid.
- You can correct mistakes by filing an amended return (Form 1040-X).
- If you owe taxes but can’t pay in full, options like installment agreements, offer in Compromise, or Currently Not Collectible status may help.
- Filing an extension gives you more time to file, not more time to pay.
What Happens If You File Your Taxes Wrong?
Mistakes on your tax return can lead to several issues. Common consequences include:
Late-Filing Penalty
If your return is incorrect and not filed on time, you could be charged up to 5% of the unpaid taxes per month, up to 25% of the total due.
Accuracy-Related Penalty
The IRS may charge a penalty for underreporting income or claiming deductions or credits incorrectly, typically 20% of the understated amount.
Interest Accrual
Even if the IRS adjusts your return, you’ll still pay interest on any unpaid balance, compounded daily.
What to Do:
- File Form 1040-X to correct your return.
- Pay any additional taxes promptly to reduce interest.
- Seek expert help to review and fix your filing.
What Happens If You File Taxes Late?
Missing the April 15 deadline? It happens, but the delay comes at a cost.
Failure-to-File Penalty
- 5% of unpaid taxes per month, capped at 25%.
- If your return is over 60 days late, you could be fined $510 or 100% of the tax due, whichever is less.
Interest on Tax Due
The IRS charges interest from the due date until the balance is paid in full. The current annual interest rate is 7%, compounded daily.
What to Do:
- File your return as soon as possible, even if it’s late.
- If you’re owed a refund, there’s no penalty, but don’t delay claiming it!
- Use USeFiler to make last-minute filing fast, secure, and accurate.
What Happens If You Forget to File Your Taxes?
Forgetting to file is more common than you think. Here’s what’s at risk:
Penalties & Interest
- The IRS imposes a failure-to-file penalty (5% per month) and additional interest on any unpaid amount.
Tax Liens
- Continued failure to file can result in a federal tax lien on your property, damaging your credit.
What to Do:
- File your overdue return ASAP.
- Pay what you owe to reduce future penalties.
- Consider expert tax guidance if it’s been multiple years.
What Happens If You Don’t Pay Your Taxes?
Filing your return but failing to pay is another issue that can lead to:
Tax Liens & Levies
- The IRS can file a lien against your property or place a levy on your wages or bank accounts.
Wage Garnishment
- Your employer may be required to withhold part of your paycheck each period until the tax is paid.
What to Do:
- Set up an Installment Agreement to pay in monthly increments.
- Explore an Offer in Compromise if you can’t afford to pay the full amount.
- Apply for Currently Not Collectible status if you’re facing financial hardship (requires IRS approval).
What Happens If You Never File Taxes?
Years of non-filing can lead to serious consequences:
Statutory Tax Lien
- The IRS may place a lien on your assets, lasting up to 10 years.
Civil Penalties
- Fines can accumulate quickly, especially when compounded with interest.
Criminal Prosecution
- In extreme cases, failure to file can result in criminal charges and even jail time.
What to Do:
- File all past-due returns as soon as possible.
- Work with a tax professional to ensure compliance.
- Be proactive in communicating with the IRS.
File Correctly and On Time: Your Guide to Avoiding Tax Trouble
The best way to avoid IRS penalties, interest, and long-term consequences? File correctly and on time. If you’ve already missed the deadline or made a mistake, don’t panic, but don’t wait, either. USeFiler is here to guide you through late filings, amendments, and payment plans to help you stay compliant.