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What Happens If You Don’t File Taxes?

July 1, 2024

Unless you meet all the conditions to be exempt from filing, the IRS expects you to submit a tax return every spring. If you don’t file your federal income tax return by the filing deadline, you could face consequences such as penalties, fines, interest, and legal repercussions.

Filing your taxes can be overwhelming, but it’s in your best interest to file earlier rather than later. Learn below about the consequences of failing to file your taxes and how you can avoid incurring extra charges.

Key takeaways:

If you file taxes late or have unpaid taxes, you may be subject to IRS-imposed penalties and fines up to 25% of your unpaid taxes.
You can apply for an extension for filing your tax return, but you’ll still have to start making tax payments.
The IRS offers alternatives if you can’t afford your tax bill, such as short or long-term installment agreements.

Table of Contents:

What Happens If I Don’t File My Taxes
Can You File Your Taxes Late?
How Long Can You Go Without Filing Taxes?
What If I Can’t Afford To Pay Taxes?
Streamline Your Tax Preparation With FreshBooks
Frequently Asked Questions

What Happens If I Don’t File My Taxes

The IRS receives copies of your personal tax forms, such as W2s and 1099s, that can help them determine whether you should have filed a return or not. If you don’t file your taxes on time or at all and the IRS is expecting you to, you may be subject to civil or criminal penalties.

Failure-To-File Penalty

If you don’t file your taxes by the filing deadline, the IRS may apply a failure-to-file penalty against you. The failure-to-file penalty represents 5% of unpaid tax liability for each month or part of a month that your tax return is overdue, but the penalty amount maxes out at 25% of your owed taxes.

If your return is more than 60 days past due after the filing deadline, the IRS applies a minimum failure-to-file penalty of whichever is less: either $450 or 100% of the tax required that’s shown on the return. Failure-to-file penalties don’t apply to late tax returns if a tax refund is due.

Failure-To-Pay Penalty

The IRS calculates and applies penalties according to how long your overdue taxes are unpaid. The failure-to-pay penalty for not making tax payments amounts to 0.5% of the tax owed amounts per month or part of a month from the payment due date, but this amount won’t exceed 25% of your unpaid tax liability. Keep in mind that the IRS charges interest on this penalty.

If you’re faced with both a failure-to-file and failure-to-pay penalty in a single month, the IRS reduces your penalty amount to a combined penalty of 5%.

Substitute Tax Return

If you don’t file your tax return by the filing deadlines, the IRS may file a substitute tax return for you using third-party information and forms, such as W-2 forms and 1099 forms. This often isn’t favorable for you since the IRS won’t help you claim any tax credits or deductions that you may otherwise be eligible for. As a result, your tax owing will be the maximum possible amount combined with any other penalties or interest you’ve accrued.

Between deadlines, forms, deductions, and penalties, tax season can be overwhelming. Check out the video below to learn how FreshBooks can help with your tax preparation.

Can You File Your Taxes Late?

Whether life events have pushed tax preparation to the side or you simply need more time, you can always file for a tax filing deadline extension. Submit Form 4868 to the IRS online or by mail by the return due date (April 15th of every year) to get up to 6 months longer to file.

Keep in mind that getting a filing extension doesn’t give you more time to pay your tax bill. If you request an extension to file, you’ll also need to estimate your tax bill and pay it to avoid incurring additional penalties and interest.

How Long Can You Go Without Filing Taxes?

Unless you’re one of the few who aren’t required to file taxes, there are technically no IRS guidelines that allow you to skip filing taxes. If you fail to file your taxes, the statute of limitations provides 6 years for the government to charge you with criminal tax evasion. However, there aren’t any limits for assessing penalties and collecting taxes, penalty amounts, and accrued interest owed.

Even if your income is too low to require that you file a return or you know you won’t owe taxes, not filing can have some major drawbacks. Besides not getting a refund for taxes deducted from your pay, you may also miss out on payouts of refundable credits. In most cases, you have 3 years to file and claim tax refunds you’re owed until you forfeit them.

What If I Can’t Afford To Pay Taxes?

If you’ve avoided filing your taxes because your tax bill amounts to more than you can reasonably pay, you can make a more feasible arrangement with the IRS. Remember that it’s in your best interest to file on time and pay what you can to limit any additional penalties or interest charges.

The IRS provides several alternative payment options, including:

Installment Agreement: IRS payment plans, also called installment agreements, allow you to set up either short-term or long-term payment plans for settling your tax bill
Offer in Compromise: With plenty of documentation demonstrating why you can’t pay your tax bill, a $205 application fee, and initial tax bill payment, you can make an offer in compromise to settle your tax debt. The IRS rejects most offers, but your payment still applies to your tax bill balance
Not Collectible Status: If you can’t pay your tax bill, request your tax bill to be given “currently not collectible” status, meaning the IRS delays collection until your financial circumstances improve

Streamline Your Tax Preparation With FreshBooks

To get the most from your tax filing and navigate deadlines, deductions, forms, and other aspects of the filing process, it’s important to keep your finances on track. FreshBooks accounting software can help you track and organize your expenses so you can maximize your claims and save on your tax bill.

If you’re interested in sorting your finances and getting prepared for tax season, sign up and try FreshBooks free.

FAQs About What Happens If You Don’t File Taxes

Taxes can get confusing, which is why FreshBooks is here to help. Check out the top FAQs about what happens if you don’t file your taxes.

What happens if you don’t file taxes for 3 years?

Even if you don’t owe taxes, failing to file your taxes for 3 years can carry significant repercussions. In addition to applying failing-to-file and failing-to-pay penalties, avoiding your taxes for 3 years can result in wage or bank account levies, liens, and tax evasion charges.

If the government owes you a tax refund, it’s considered forfeited after 3 years. That means that not filing for 3 years also means you’ll miss out on your refund as well as applicable tax credits. Your self-employed income also won’t be reported, which prevents you from receiving credits toward Social Security retirement or disability benefits.

What do I need to do if I haven’t filed taxes in 10 years?

If you haven’t filed your taxes in 10 years, the first task is to file any outstanding tax returns. This allows you to claim deductions and credits the IRS may have neglected with substitute returns and stops failure-to-file penalties from piling up.

Who is not required to file taxes?

If your total annual income doesn’t exceed the standard deduction, you’re single, and you’re under 65, you may not be required to file.

Is it mandatory to file taxes?

The IRS requires most U.S. citizens and permanent residents to file a tax return if they exceed the standard deduction threshold.

Can you go to jail for not filing your taxes?

The IRS won’t send you to jail if you miss a tax deadline or can’t afford your payments. They do, however, have the authority to charge you with felony tax evasion or fraud that may result in up to 5 years of prison.

Will I lose my property if you don’t file taxes?

If you refuse to file your taxes, the IRS can file tax liens against your property.

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Sandra Habiger, CPA

About the author

Sandra Habiger is a Chartered Professional Accountant with a Bachelor’s Degree in Business Administration from the University of Washington. Sandra’s areas of focus include advising real estate agents, brokers, and investors. She supports small businesses in growing to their first six figures and beyond. Alongside her accounting practice, Sandra is a Money and Life Coach for women in business.