It seems hard to believe that April is here. This means that the deadline to file your income tax return is nearing. This year the last date to file your income tax return is April 15, 2025. Failure to file a timely return can subject you to a late filing penalty.

The deadline to file the return has been extended until May 1, 2025 for taxpayers located in areas affected by federally declared disaster areas. These are:

1. All counties of Alabama, Florida, Georgia, North Carolina and South Carolina.
2. The city of Juneau, Alaska.
3. Chaves County, New Mexico.
4. Carter, Claiborne, Cocke, Grainger, Greene, Hamblen, Hancock, Hawkins, Jefferson, Johnson, Sevier, Sullivan, Unicoi and Washington counties of Tennessee.
5. Albemarle, Appomattox, Bedford, Bland and Botetourt counties; Bristol City; Buchanan, Buckingham, Carroll and Charlotte counties; Covington City; Craig County; Danville City; Dickenson and Floyd counties; Galax City; Giles, Grayson, Greene, Lee, Madison, Montgomery and Nelson counties; Norton City; Patrick, Pittsylvania and Pulaski counties; Radford City; Roanoke City; Roanoke, Russell, Scott, Smyth, Tazewell, Washington, Wise and Wythe counties of Virginia.

If the income tax return is not filed by the due date of the return, the penalty is assessed for each month, or part of a month, the return is late. Hence, even if the return is only a few days late, a full month’s penalty will be assessed.

The penalty for late filing a tax return is 5% of the amount of tax required to be shown on the return reduced by any taxes paid through withholding or estimated payments and by any credits to which the taxpayer is entitled. The penalty will be imposed for a maximum of 5 months (25%). In the event the return is filed more than 60 days late, the IRS will impose a minimum failure to file penalty of the lesser of 100% of the tax shown to be due on the return or $510. If the IRS determines that the failure to timely file the return was fraudulent, the failure to file penalty is increased to 15% per month up to a maximum of 75%.

If you believe that you will not be able to file your return by the applicable due date, the easiest way to avoid the late filing penalty is to request an extension of time to file your return. The IRS will automatically grant you an extension of time to file your income tax return until October 1, 2025 if the request to extend is filed with the IRS by the due date of the return.  If the request to extend the due date is filed late, the late filing penalty will not be avoided.

It is important to understand that the extension of time to file a tax return is not an extension of time to pay any tax which may be due. If you do not pay any taxes you may owe by the due date of the tax return, you will incur a failure to pay penalty.

The failure to pay penalty is .005% (1/2 of 1%) of the unpaid tax. The penalty is imposed for each month, or part of a month, the tax is not paid. Like the failure to file penalty, a full month’s penalty is charged even if the payment is made within the month. The maximum amount of the failure to pay penalty that can be imposed is 25% of the unpaid tax.

If a return is filed late and the tax is not fully paid, you will incur both the failure to file penalty and the failure to file penalty with 25% caps for each penalty. If both the failure to file and the failure to pay penalties apply in a particular month, the failure to file penalty will be reduced by the failure to pay penalty for that month. Once the failure to file penalty reaches the 25% maximum, that penalty will no longer be assessed, but the failure to pay penalty will continue to accrue until it reaches the 25% maximum.

The IRS will assess interest on the failure to file penalty and the failure to pay penalty. The interest accumulates daily and does not stop accruing until the balance is paid in full. The interest rate charged by the IRS is determined quarterly. The IRS’s interest rate for the second quarter of 2025 is 7% and compounds daily.

The IRS’s penalties and interest accrue very quickly. Now is the time to make sure your return, or the request for filing an extension, are timely filed so that you will not be subject to the failure to file penalty. In addition, the tax liability for the year must be estimated and any tax which may be due must be paid by April 15, 2025 in order to avoid the failure to pay penalty.