What Happens If I Miss a Tax Deadline? Penalties and How to Fix It

It happens: a busy season, a new baby, a lost notice. If you've missed a tax deadline, the most important thing is to act quickly, because most penalties keep growing over time.

Federal penalties

Failure to file

If you don't file your return (or an extension) on time and you owe tax, the IRS charges a penalty of 5% of the unpaid tax for each month the return is late, up to 25%. This is the biggest penalty, so filing on time matters even if you can't pay.

Failure to pay

If you file but don't pay in full, the penalty is generally 0.5% of the unpaid tax per month, up to 25%. The rate drops if you set up an approved payment plan.

Interest

Interest is charged on unpaid tax and on many penalties until the balance is paid.

Late information returns

Late Forms 1099-NEC, W-2 and 1099-MISC have their own per-form penalties that increase the later you file. Filing within 30 days of the deadline keeps penalties lower.

Partnership and S-corp returns

Late Form 1065 and Form 1120-S returns carry penalties per owner, per month, even if no tax is due. Owners of multi-member LLCs are often surprised by this.

Washington penalties

Late Department of Revenue excise tax returns generally incur penalties that increase the longer the return is late, plus interest. Washington also charges penalties for late annual reports with the Secretary of State and for late employer reports. Even a "zero" return filed late can trigger a penalty.

What to do right now

1. File as soon as possible, even if you can't pay in full. This stops the larger failure-to-file penalty.
2. Pay what you can. Every dollar reduces penalties and interest.
3. Set up a payment plan. The IRS offers online payment plans for many individuals and businesses.
4. Respond to notices. Don't ignore letters; deadlines in notices matter.
5. Get your books current. You can't file accurately without them.

Can penalties be removed?

Sometimes. Options include:

• First-time penalty abatement: If you have a clean compliance history for the prior three years, the IRS often removes failure-to-file and failure-to-pay penalties for one period.
• Reasonable cause: Serious illness, natural disasters or other circumstances beyond your control may qualify.
• Washington DOR also has a process to request penalty waivers in certain situations.

Interest generally can't be waived.

How to avoid it next time

• Build a tax calendar with reminders two weeks before each date
• File an extension if your return won't be ready (remember an extension to file isn't an extension to pay)
• Keep books current every month so filing is quick
• Use a bookkeeper who tracks compliance deadlines

The bottom line

A missed deadline is fixable. File quickly, pay what you can, ask about abatement, and put systems in place so it doesn't happen again.

---

Need help getting this right? TRIG Bookkeeping & Tax Services helps new business owners in Washington with company registration, monthly and annual bookkeeping, and government compliance. Contact us to talk about your business.

This article is general information, not legal or tax advice for your situation. Tax rules and fees change, so confirm current details with the IRS, the Washington Department of Revenue, or a qualified professional.