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What are the Penalties For Filing Taxes Late or Without an Extension?

August 3rd, 2022 | 8 min. read

By Bryan Cremeen

For about half of people, having a deadline means getting the task done right away so you can get back to your usual activities. For the other half of people, it means you can continue to focus on your usual activities right now - especially if they're piling up on you - until it's almost time for the task to be due.

Let's be honest though - we all procrastinate sometimes. That even includes some accountants falling behind on filing taxes. If you're only meeting with an annual tax accountant, you probably aren't being treated as a priority. This can result in missing important due dates and being penalized for it - and it's much more common than you'd think. When was the last time you felt like you had good communication with your accountant?     

After talking with thousands of small business owners, we've noticed that many feel that their annual tax accountant doesn't have time for them. They often ask us:

  • What happens if my taxes get filed late?
  • What happens if I get an extension?
  • What do I need to know about government payment plans?

Blog - What are the Penalties For Filing Taxes Late Without an Extension

Filing Your Taxes Late

If you or your accountant are late to file your taxes, meaning the tax filing deadline was missed, then you can expect a failure-to-file penalty. Think of it as a late fee. A failure-to-file penalty is normally equal to five percent of the taxes you owe, recurring every month or part of a month that your tax return is filed late.

There is also a failure-to-pay penalty that goes hand-in-hand with the failure-to-file penalty. A failure-to-pay penalty starts from the day taxes were due, and there is interest on the amount. Keep in mind, you will only incur this penalty if you owe money. If you get a refund, there is no money to pay.

If you have been charged both the failure-to-file penalty and the failure-to-pay penalty in the same month, the maximum penalty will only be five percent. However, if you're able to prove reasonable cause for not filing or paying on time, then you may not have to pay them. Plus, an extension can help you avoid a failure-to-file penalty by moving out the start date to the extension deadline.

You can get a full outline of the penalties by reading The Consequences of Falling Behind on Accounting & Taxes.

Filing With an Extension

Your accountant can file your extension for you if they have your name, address, and Social Security number. They also need to perform a tax projection to write the estimate of what you might owe on the extension form. A quality accountant will inform you of the estimate so you can decide if you'd like to make payments to reduce the amount owed.

Are Extensions Bad?

It's a misconception that being put on extension by your accountant is inherently a red flag. It's not a red flag to the government and will not trigger an audit.

However, if you provided the information your accountant needed on time and they still placed you on extension, it can mean they are too busy for you. This is especially true if it happens repeatedly. If they can't file your taxes on time, how do you expect them to help with tax strategy?

The only major downside of filing an extension is that if you owe money, it is still due on the same date as it would have been without the extension. The extension only gives you extra time to file the paperwork. This gives you little time to prepare if the amount is larger than expected, and annual tax accountants often fail to inform their clients of this fact.

For 2021 taxes, an extension would place your small business at a due date of September 15th or October 17th, 2022. Don't forget there are still separate deadlines for filing and paying, and even though it's free to file for an extension, you'll be paying the interest for missing the pay date.

There are also indirect consequences of getting an extension to consider. They will either revolve around a lack of current information (limited financial information, delayed business decisions) or a potential for missing your payment deadline (interest and penalties, negatively impacted credit score). It can also make it harder to get business loans if you have unresolved tax issues.

Stay on top of due dates and payroll tasks, learn when you should contact your accountant, and understand how to read and use financial statements by downloading:

Download the Small Business Accounting Kit

Government Payment Plans

Ideally, you'll want to file and pay your taxes on time every year. When this isn't possible, it's important to get an extension and tax estimate to start paying toward. As long as you pay as much as you can with your return, you can minimize fees.

You can also look into getting a loan from the government or paying it back in installments. The good news is this means you can reduce the failure-to-pay penalty by 50 percent. The government will, however, charge you interest. Regardless, this is a great benefit for those who have fallen behind on their taxes.

Get Your Business Taxes Filed on Time

Missing the due date for your taxes isn't the end of the world as long as you know what penalties to expect, as well as how an extension and payment plans can help.

At CSI Accounting & Payroll, our accountants are aware of tax law and deadline changes to help you avoid fees that you may have otherwise been unaware of. In the past, we've even been able to negotiate penalty forgiveness for clients who have had a good prior payment history. While we're on the topic of saving you money, we should also mention that our tax planning strategies will help you get the most out of your tax returns.

If you have questions about if we can be the best option for your business, our professionals are here to help! We'll examine your situation and discuss what we can do for you. Click the button below for a free consultation.


Not ready to have a conversation yet? That's okay! You can read more about small business taxes here:

Read the complete guide to Small Business Taxes For Beginners

Bryan Cremeen

Bryan joined CSI Accounting in 2019. He joined the team after CSI purchased his accounting firm, AccountSource LLC, which he had owned since 2005. He graduated from St. Cloud State in 2001 with a Bachelor's Degree in Accounting and has been an Enrolled Agent since 2010. Before owning his own accounting practice, Bryan had worked at the State of MN handling financial reporting and had been in private industry as a Controller. His primary responsibilities include overseeing the accounting department and making sure clients are receiving quality service. Fun Fact: Bryan has played soccer since the age of 4. He still plays soccer year round through various adult leagues and is an avid supporter of the Minnesota United MLS soccer team. COYL!!! (Come on, you Loons!!!)