Owing nothing in tax can feel amazing. For some founders, it might even translate to “I don’t need to file anything because I don’t owe anything!” In fact, 31% of Americans are procrastinating during tax time. But we’ve got some news for you.
According to the IRS, you do need to file taxes, even when you don’t owe anything to them. And to set the record straight, IRS is keeping track of your filing status. So if you’ve got a penalty placed on you by the IRS, it might be why!
So in this article, let’s demystify tax compliance in taxes 2025 and explore what the IRS really, really thinks about your business if you’re filing taxes late when you don’t owe any. Let’s kick things off with…
What happens when you file late?
When you file late, even when you owe nothing, the IRS still takes notice. According to IRS Topic 653, a late return due over 60 days triggers a minimum penalty of $510 in 2024, even if zero tax is due.
The IRS guidance also confirms that the interest also accrues daily on any unpaid balance, including on penalties, starting from the day after the original due date.
But, money’s not the only thing on the line. The IRS also builds compliance profiles and notes repeat late filers as “at risk” which can increase scrutiny. In paying 2025 taxes, the IRS emphasizes compliance consistency and accuracy together.
Note: The IRS charges 5% per month, up to a cap of 25% for unpaid tax amounts.
Why does late filing trigger audit attention?
Even with a $0 balance, filing late can still put your business on the IRS’s radar. Here’s why:
- The IRS runs on automation now. Their systems scan for patterns and flag anything that looks inconsistent. A late return, especially if it’s more than one, will stick out!
- Inconsistent behavior equals audit risk. Even if you have accurate books, filing taxes late repeatedly can mark your business as unreliable and disorganized in the IRS’s eyes.
- Messy receipts trigger manual reviews. If your records are all over the place, it signals poor compliance hygiene. So try to get ahead of screenshots, inbox chaos and half-filled spreadsheets.
- Manual errors can disrupt automated processing. A few mismatched deductions or missing documents are enough to get your file pulled for extra review.
5 common reasons startups file late
Late filings aren’t really about laziness. They’re mostly a symptom of how chaotic and unpredictable early-stage startup building really is. When you’re bootstrapping, chasing growth or wearing five hats, tax deadlines can start to feel like background noise.
Here are some common reasons why startups like yours file their taxes late, especially when they don’t owe much (or anything at all):
1. Manually sorting receipts takes time
Here’s the honest truth: paper receipts are the enemy. Startups still manually sifting through a mix of inbox orders, faded physical receipts, and random screenshots in April are setting themselves up for late nights and missed filings.
It’s tedious, it’s error-prone, and it slows everything down. The fix? Start logging expenses as you go. Even a free scanner app can be the difference between filing on time or not filing at all.
2. Confusion over deductions
Deduction anxiety is real. Can you write off coworking spaces? What about that domain you bought but never used? Startups often delay filing because they’re second-guessing what counts and what doesn’t.
And when you're not sure, the tendency is to avoid it altogether. That hesitation can push filing past the deadline. What you need is a deduction cheat sheet (or a tax pro who gets startup life) to take the guesswork out of it.
3. Lack of tax preparation software
Trying to file your taxes using Google Sheets and vibes? It’s a common founder move, albeit a risky one. Without actual tax prep software, you’re stuck calculating things manually, tracking down forms last-minute, and hoping the math checks out.
The better path is simple: invest in software that makes tax compliance part of your routine, not a once-a-year scramble. Tools like Xero, QuickBooks, or even founder-friendly platforms like Keeper can help.
4. No client-level tracking
If you’re a service-based startup, not tracking income by client is basically setting yourself up to forget a 1099 or underreport something. And the IRS loves nothing more than a mismatch between what your clients report and what you file.
Founders often push taxes until they’ve “sorted out the numbers”, which usually means scrambling through old invoices and hoping nothing was missed. A system that tracks clients, payments, and payouts in real time saves you from that chaos.
5. Founder burnout
Let’s be real. No one builds a startup because they love admin work. Tax filing just isn’t top of mind when you’re closing sales, building product, or raising funds. Founders push it off, sometimes until it’s too late. It’s bandwidth.
But the consequences still show up in the form of penalties, missed deductions, or worse, IRS flags. If that’s you, try setting aside one “finance day” per month. Better yet, delegate it entirely.
5 consequences of filing late
If you think filing late doesn’t matter or that you’re not in for a ride, you’re wrong. The IRS may not chase you down with sirens the first time you’re late. But consistent delays stack up and they come with very real consequences that go far beyond a small penalty.
Here's what can happen when your startup gets a reputation for missing deadlines.
1. Delays in refunds
If you’re owed a refund but file late, that money stays in the IRS’s hands longer and no, they don’t send it with interest. Worse, if you’re waiting on those funds to reinvest in your business, these delays can mess with your growth plans.
In simpler words, file late and wait longer than you had to.
2. Trouble getting loan or funding approval
Lenders, grant bodies, and investors all ask for your tax returns and if you're filing late (or not filing at all), it sends a red flag. A missed deadline might look like financial disorganization or even potential fraud.
Even if you're profitable, a sketchy compliance record can lead to delays in approvals or outright rejections. Want that funding to close fast? Your tax record needs to be clean and timely.
3. IRS flagging you as “at risk”
Here’s what they don’t always tell you: the IRS tracks filing behavior. A startup that consistently files late, misses deadlines, or files incomplete returns might get flagged for review, even if there’s no fraud involved.
This doesn’t always mean an audit, but it could mean more scrutiny, more notices, and less grace. And once you’re on the radar, getting off it takes time.
4. Potential penalties
Even if you owe nothing, late filing can still trigger penalties like the infamous “failure to file” fee that kicks in just for missing the deadline. IRS assessed $84.1 billion in civil penalties in FY 2024, including $20.2 billion from individuals and $20.9 billion from businesses.
And if you do owe taxes later? You could lose out on automatic extensions, payment plans, or penalty waivers the IRS typically grants to businesses with clean records. One late filing is a hiccup. A pattern? That’s when grace starts to disappear.
5. Disruption to taxes 2025 automation system
As more founders rely on accounting software and auto-reminders for compliance, late filing breaks those systems. If you miss one year’s deadline, it throws off projections, estimated payments, and automated forms for the next.
It’s like skipping one episode of a show and suddenly not understanding anything in season 2. You’ll find yourself fixing carryover issues from last year instead of moving forward clean.
Note: If you fail to file taxes for two years, the IRS hits you with a penalty and makes you ineligible for a payment plan. You also get delayed refunds for the third year by a margin of a few months.
How is the IRS evolving in 2025?
In 2025, the IRS is using AI and automation to spot filing patterns and flag late returns, even when you owe nothing. A recent analysis noted that today’s AI systems scan massive amounts of tax data, looking for discrepancies instead of relying on manual reviews.
IRS identified around 125,000 high-income non-filers for outreach through this automation and 25,000 of them have incomes well over a million dollars.
Meanwhile, small-scale tax preparation software are also getting smarter which means zero-balance late filers can’t rely on tolerance anymore. As AI becomes implemented, it becomes necessary to enforce compliance consistency on your startup.
Tips on how to avoid filing delays
Don’t want to file late? You don’t have to. Here are some tips on getting ahead of the tax season when you don’t owe taxes:
1. Use tax preparation software
AI-powered receipt scanners and tax preparation software are changing the game in real time. Long gone are the days when manual sorting, categorizing, and recording accounts were the norm. Now, it’s tax preparation software, especially one that’s powered by smart AI.
Tax preparation tools like QuickBooks and Bench help you with:
- Automating data entry
- Receipt management
- Filing dates and reminders
- Deduction prompts
- And much more!
Tip: Sync your tax preparation software with Receiptor AI’s features, allowing for real-time bookkeeping records.
2. Separate business and personal finances
Mixing personal and business transactions is a recipe for mismatches and audits. Move to dedicated bank accounts and credit cards for your startup.
Use your tax software to link them directly, and let Receiptor AI pull in only business-related receipts, keeping your records clean and friction-free.
3. Use a reverse sales tax calculator
Quarterly filings get tricky when you're reverse-calculating tax from total receipts. Free tools like CalculatorSoup’s reverse sales tax calculator can instantly back out tax from gross sales.
You can also consider Avalara AvaTax, which provides street-level rate calls for both forward and reverse sales tax. The best part? It does so with real time accuracy and across multiple jurisdictions!
4. Consider sales tax compliance outsourcing
Tracking sales tax across states is a full-time job. Services like Avalara Returns can handle registration, filing, and remittance for you—making sure you're on time, every time. And if records pile up, outsource bookkeeping to a dedicated provider like Bench.
Tip: In 2023, 95.4% of returns were filed electronically, meaning you can simply file your tax returns online without any paper hassle.
How to build an automated startup tax system
For founders who are tired of the endless trail of tasks, building a smart and automated tax system is key. It takes away the element of filing late because of mismanagement, at the very least.
So how do you build that? You create an automated and minimum viable workflow, of course. Here’s how:
- Replace manual sorting with a receipt scanner app: Receiptor AI scans all your receipts on Whatsapp, emails and manual uploads, categorizing them into smart categories for easier management. You can connect that with a tax preparation software and export reports easily to replace the hours of manual sorting with minutes of Receiptor AI.
- Use invoicing software or a CRM: No client tracking? No problem? Use an invoicing software or a CRM to keep a track of each client spending and income. That way, you’ll know exactly what comes and what goes.
- Try sales tax compliance outsourcing: Sales tax filing is time-consuming, we know. But what makes it easier is the availability of outsourcing options out there! Sales tax compliance outsourcing takes the burden off your shoulders with the mental peace that your tax is being handled by experienced experts.
- Break filings into monthly reviews: Filing year-round taxes at year end will cause severe tax anxiety to founders and solopreneurs. The simple fix is to conduct a 30-minute monthly review to sort through taxes monthly and file them together when the deadlines comes.
What to do if you already filed late
Well, if you’re already past that deadline, there’s still something you can do! While filing late taxes has certain consequences for startups, here’s what to do:
- Instead of panicking, get caught up on your taxes. It doesn’t matter if you owe a dollar or none, it’s important to get it recorded.
- File as soon as possible, even if that means doing it retroactively. Get all your documentation and file it with the IRS.
- Use a tax preparation software and receipt scanner like Receiptor AI to ensure your tax documentation is accurate and won’t be flagged by the IRS.
- Keep tangible proof that you don’t owe anything in taxes. After all, you’re filing that you don’t owe anything for the record!
- Reach out to a CPA if you’re not sure what to do.
Build a tax compliance system with Receiptor AI
Just because you didn’t owe anything doesn’t mean the IRS didn’t clock the late file. In Taxes 2025, it’s not just about being right; it’s about being consistent. Filing on time, every time, shows you're running a real operation, not just winging it from your laptop and a half-empty coffee cup.
The smartest move? Automate everything you can. You don’t need a finance team to build a real compliance system. With Receiptor AI, you can automate receipt tracking, organize deductions, and plug it all into your tax prep software or hand it off for sales tax outsourcing
Filed late this year? Cool. Start preparing today with Receiptor AI because next year’s deadline is closer than you think.
