US Tax Filing Penalties – What Happens If You Don’t File?
Failing to file or pay US taxes on time can lead to substantial penalties, interest charges, and even legal consequences. The IRS enforces strict rules for late filings, unpaid taxes, and unreported foreign assets, making compliance essential.
Failure to File vs. Failure to Pay – Understanding the Difference
The IRS imposes different penalties for failing to file a tax return versus failing to pay taxes owed
Failure to File Penalty – Charged when a taxpayer does not submit a required tax return by the deadline.
Failure to Pay Penalty – Applies when a taxpayer files a return but does not pay the full tax amount owed.
The failure-to-file penalty is much higher than the failure-to-pay penalty, making it crucial to file on time, even if full payment isn’t possible.
Late Filing Penalties – How Much Can You Owe?
If you miss the April 15 filing deadline (or June 15 for expats) without an extension, the IRS imposes:
5% of unpaid taxes per month, up to a maximum of 25%.
A minimum penalty of $485 (for returns over 60 days late) or 100% of unpaid taxes, whichever is less.
Filing an extension can prevent these penalties, but interest still applies to unpaid balances.
Late Payment Penalties and Interest Charges
The IRS charges interest on unpaid taxes, accumulating until the full balance is paid.
The failure-to-pay penalty is 0.5% per month on the unpaid balance, up to 25% total.
Interest accrues daily at the federal short-term rate plus 3%, increasing the amount owed over time.
If taxes remain unpaid after 10 days of receiving a final IRS notice, penalties can increase to 1% per month.
Taxpayers can avoid escalating penalties by setting up an IRS payment plan or requesting penalty relief.
IRS Failure-to-File Penalty for FBAR & FATCA Non-Compliance
US citizens and Green Card holders with foreign financial accounts must comply with FBAR (FinCEN Form 114) and FATCA (Form 8938) requirements. Failure to report foreign accounts can result in severe penalties:
FBAR penalties:
Non-willful failure to file – Up to $10,000 per violation.
Willful failure to file – The greater of $100,000 or 50% of the account balance per violation.
FATCA penalties:
Up to $50,000 for failing to file IRS Form 8938.
The IRS aggressively enforces foreign asset reporting, and penalties can accumulate quickly.
Can the IRS Seize Assets or Revoke Passports for Non-Filing?
If tax debts remain unpaid, the IRS has enforcement powers that can include:
Tax liens and levies – The IRS can place a lien on bank accounts, real estate, and other assets
Passport revocation – Taxpayers with unpaid debts over $59,000 (adjusted for inflation) may have their US passport denied or revoked.
Legal action – In extreme cases, failure to file for multiple years can result in criminal prosecution.
To avoid these consequences, taxpayers should file on time, report foreign accounts, and explore payment options for unpaid taxes.
UK Tax Filing Penalties – What Happens If You Don’t File?
Failing to file a UK Self-Assessment tax return or pay taxes on time can result in automatic fines, interest charges, and enforcement actions by HMRC. Understanding these penalties can help taxpayers avoid costly mistakes and stay compliant.
Late Self-Assessment Filing Penalties
Missing the January 31 online filing deadline for Self-Assessment tax returns leads to immediate penalties:
- £100 fixed penalty if the return is up to 3 months late, even if no tax is owed.
- £10 per day fines (up to £900) if the return is over 3 months late.
- £300 or 5% of the tax due (whichever is higher) if the return is over 6 months late.
Further penalties of £300 or 5% of the tax due for returns over 12 months late.
Even if a taxpayer misses the deadline but does not owe tax, these fines still apply, making timely filing essential.
Late Payment Interest and Additional Penalties
MIn addition to late filing fines, HMRC charges interest and penalties on unpaid tax bills:
- Interest on unpaid tax accrues daily from the deadline until full payment is made.
- 5% penalty on any unpaid tax after 30 days.
- Another 5% penalty at 6 months and again at 12 months for unpaid amounts.
Additional enforcement actions if tax remains outstanding for an extended period.
Setting up a Time to Pay arrangement with HMRC can help prevent escalating penalties for those struggling to meet payment deadlines.
HMRC Investigations and Tax Compliance Crackdowns
If HMRC suspects tax evasion, under reported income, or hidden foreign assets, they may launch a tax investigation, which can lead to:
- In-depth tax audits, requiring full financial disclosure.
- Increased penalties of up to 100% of unpaid tax for deliberate under-reporting.
- Criminal prosecution for serious cases of tax evasion.
Those with unreported offshore income can use HMRC’s Worldwide Disclosure Facility (WDF) to report and minimize penalties voluntarily.
Can HMRC Take Legal Action for Non-Payment?
If taxes remain unpaid, HMRC has the authority to enforce collection through:
- Court orders – Legal action to recover unpaid amounts.
- Asset seizures – Freezing of bank accounts or repossession of property.
- Debt collection agencies – HMRC can assign unpaid debts to enforcement agents.
For severe cases of tax avoidance or fraud, HMRC may also issue criminal penalties, imprisonment, or director disqualification for business owners.
How to Avoid Tax Filing Penalties in the US and UK
Avoiding tax penalties requires proactive planning, timely filing, and utilizing available relief options. Whether facing late filings, unpaid tax bills, or unreported foreign income, there are ways to minimize penalties and stay compliant with both IRS and HMRC regulations.
When to Request a Filing Extension or Payment Plan?
For taxpayers who cannot file or pay taxes on time, requesting an extension or setting up a payment plan can help reduce penalties.
US Filing Extensions and Payment Plans:
Filing Extension: Taxpayers can file IRS Form 4868 for an automatic six-month extension (until October 15), but taxes owed must still be paid by April 15 to avoid interest.
Payment plans: The IRS offers short-term (up to 180 days) and long-term (monthly installments) payment plans to help taxpayers pay off tax debts over time.
UK Filing Extensions and Payment Plans:
Filing Extension: HMRC does not grant general extensions, but taxpayers experiencing hardship may request an exemption from penalties if they have a valid reason for missing the deadline.
Time to Pay Arrangement: Taxpayers struggling to pay their bills can set up an HMRC payment plan online to spread tax payments over an agreed period.
Requesting an extension or arranging payments early can prevent unnecessary penalties and interest charges.
Voluntary Disclosure Programs – Fixing Past Non-Compliance
Taxpayers who missed previous filings or have undeclared foreign income can minimize penalties by using IRS and HMRC voluntary disclosure programs:
IRS Streamlined Filing Compliance Procedures – Allows expats and non-willful taxpayers to correct missed filings without penalties.
Offshore Voluntary Disclosure Program (OVDP) – Available for those with serious compliance issues, but may include fines.
Delinquent FBAR & FATCA Filing Program – Reduces penalties for taxpayers who failed to report foreign accounts on time.
UK Voluntary Disclosure Programs:
Worldwide Disclosure Facility (WDF) – HMRC’s program for reporting previously undeclared foreign income and assets.
Contractual Disclosure Facility (CDF) – Used for cases where HMRC suspects deliberate tax fraud, providing a way to settle tax debts and avoid prosecution.
How to Avoid Tax Filing Penalties in the US and UK
Avoiding tax penalties requires proactive planning, timely filing, and utilizing available relief options. Whether facing late filings, unpaid tax bills, or unreported foreign income, there are ways to minimize penalties and stay compliant with both IRS and HMRC regulations.
When to Request a Filing Extension or Payment Plan
For taxpayers who cannot file or pay taxes on time, requesting an extension or setting up a payment plan can help reduce penalties.
US Filing Extensions and Payment Plans:
Filing Extension: Taxpayers can file IRS Form 4868 for an automatic six-month extension (until October 15), but taxes owed must still be paid by April 15 to avoid interest.
Payment Plans: The IRS offers short-term (up to 180 days) and long-term (monthly installments) payment plans to help taxpayers pay off tax debts over time.
UK Filing Extensions and Payment Plans:
Filing Extension: HMRC does not grant general extensions, but taxpayers experiencing hardship may request an exemption from penalties if they have a valid reason for missing the deadline.
Time to Pay Arrangement: Taxpayers struggling to pay their bills can set up an HMRC payment plan online to spread tax payments over an agreed period.
Requesting an extension or arranging payments early can prevent unnecessary penalties and interest charges.
Voluntary Disclosure Programs – Fixing Past Non-Compliance
Taxpayers who missed previous filings or have undeclared foreign income can minimize penalties by using IRS and HMRC voluntary disclosure programs:
IRS Streamlined Filing Compliance Procedures – Allows expats and non-willful taxpayers to correct missed filings without penalties.
Offshore Voluntary Disclosure Program (OVDP) – Available for those with serious compliance issues, but may include fines.
Delinquent FBAR & FATCA Filing Program – Reduces penalties for taxpayers who failed to report foreign accounts on time.
UK Voluntary Disclosure Programs:
Worldwide Disclosure Facility (WDF) – HMRC’s program for reporting previously undeclared foreign income and assets.
Contractual Disclosure Facility (CDF) – Used for cases where HMRC suspects deliberate tax fraud, providing a way to settle tax debts and avoid prosecution.
Taking advantage of these disclosure programs can help resolve past tax issues and minimize potential fines and legal consequences.
Need Help Catching Up on Your Taxes?
Falling behind on tax filings can be stressful, but you don’t have to navigate it alone. Whether you need to file overdue US or UK tax returns, report foreign income, or correct past non-compliance, our expert tax team can help you get back on track while minimizing penalties.
Contact us today for professional support and a clear path to compliance.