Why You Should File Your Taxes Even if You Can't Pay

You are ready to file your taxes, but realize you can't pay the balance due. Instead of filing now and paying later you may be considering waiting to file until you have the funds to pay your taxes. But that could end up costing you more in the long run. When you do not file and pay your taxes on time you can incur a couple of different penalties along with interest.

Failure to Pay Penalty

The first type of penalty is a failure to pay penalty. This penalty is structured as a percentage of the amount that you owe. This penalty is pretty much unavoidable, you can get an extension to pay, but that extension has to be requested and is not easily granted unless you have circumstances that would reasonably cause a delay in paying your taxes.

Failure to File Penalty

The failure to file penalty is a completely separate penalty than the failure to pay penalty. This penalty is structured as a percentage of what you owe for individuals, but for certain business types it can still be assessed even if there is no balance due. By filing your taxes even if you cannot pay you can avoid this penalty. You can also file for an automatic 6 month extension to file your return. This allows you to avoid the failure to file penalty as long as your return is filed by the extended deadline.


When you incur penalties you can also accrue interest on those penalties. Interest can also be assessed on balances due. Interest is generally unavoidable, but you can minimize the interest by minimizing the amount of penalties incurred. Interest is also very difficult to have removed/abated whereas penalties are not typically as challenging to have abated.

It's best practice to submit your return even if you are unable to pay any balances due to minimize penalties associated with late filings.

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