What Happens If I Don’t File My Taxes?

Written by Top Dog Tax Relief          
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Overview

You may have seen some chatter on social media encouraging people to refrain from submitting their income tax returns as a form of protest against the current administration. Some also continue to push the narrative that income taxes are voluntary or illegal, so you’re not required to file (total myth). But before you follow this misguided advice, it’s important that you understand what happens if you don’t file your taxes. Beyond the expected penalties and interest fees, you could be facing serious collection actions, revocation of your passport, or even jail time.

Key Takeaways

  • Not filing taxes can trigger serious penalties and collection actions. If you owe taxes and fail to file, the IRS can charge failure-to-file and failure-to-pay penalties, add interest, garnish wages, place liens on property, or levy bank accounts.

  • The IRS can file a tax return for you — and it usually increases what you owe. If you don’t file within about two years, the IRS may prepare a Substitute for Return (SFR) that reports your income but does not include deductions or credits, often resulting in a much higher tax bill.

  • Ignoring tax filing requirements can lead to long-term consequences. The IRS can pursue unpaid taxes indefinitely until a return is filed, and serious cases may lead to passport revocation or even criminal tax evasion charges.

What Happens When You Don’t File Your Taxes

As we stated earlier, there are consequences for not filing your taxes. How severe those consequences are will depend on whether you owe money or not, as well as how much you owe and how long you’ve avoided filing and paying your taxes.

Consequences of Not Filing Taxes When You Owe

It’s not uncommon for taxpayers to postpone filing because they realize they owe more than they can afford to pay. This, however, is not a good excuse for failing to file on time.

If you owe taxes and don’t file as required, you could face the following consequences:

  • Failure-to-File Penalty. The IRS charges a 5% penalty on the unpaid tax for each month (or part of a month) your return is late. The penalty maxes out at 25% of the total owed.
  • Failure-to-Pay Penalty. In addition to the failure-to-file penalty, you’ll be hit with a 0.5% penalty for failing to pay on time. The good news is that when combined, the maximum charge is 5% per month, not 5.5%. This penalty also maxes out at 25% of the balance due.
  • Interest Charges. Although the penalties may stop accruing at 25%, the IRS will continue to charge interest on the amount owed (including penalty fees) until it is paid in full.
  • Wage Garnishment. If you continue to ignore requests for payment, the IRS will move to more aggressive collection actions. One of these is wage garnishment. Unlike other creditors, the IRS has leeway to take a much bigger chunk of your paycheck to help pay down your debt.
  • Tax Lien. For those with tax debts over $10,000, the IRS will likely place a tax lien on your property. This may include your home, other real estate holdings, personal property, and other financial assets.
  • Tax Levy. In some cases, the IRS may seize your assets, including bank and retirement accounts.

Generally, the IRS will give you about two years to submit your tax return on your own. If you don’t, it will submit a Substitute for Return (SFR) on your behalf. This is not a good thing. Although the IRS will report all the income you earned, any deductions and credits you may be eligible to claim will not be included. This tends to result in a much higher tax bill.

Consequences of Not Filing Taxes When You’re Due a Refund

The consequences of not filing a return when you’re due a refund are much less damaging. Although there are no penalty fees for not filing, you have limited time to submit your return and secure your refund.

The IRS gives you three (3) years from the original deadline date to file and request your refund. After that, you forfeit it, and it becomes property of the U.S. Treasury.

More Serious Consequences For Those Evading Taxes

If you never file your taxes, the IRS can go back indefinitely to collect the money owed. The statute of limitations (typically 10 years) doesn’t start until you file, or the IRS submits an SFR. Even then, the clock could restart if you file on your own after the SFR.

You may also face additional actions, such as:

  • Revocation of Your Passport. For those with large unpaid tax debts ($62,000+), the government may deny or even revoke your passport. This can make traveling outside the U.S. problematic.
  • Tax Evasion Charges. If the IRS believes you willfully and intentionally avoided filing and paying your taxes, it could slap you with tax evasion charges. They generally have up to six (6) years from the original due date to bring criminal charges. If convicted (felony), you can face up to five (5) years in prison and up to $250,000 in fines.

Final Thoughts

Failing to file your taxes may seem like a way to avoid dealing with a difficult financial situation, but it almost always makes the problem worse. Penalties, interest, and aggressive collection actions can quickly turn a manageable tax bill into a much larger financial burden. Even if you can’t afford to pay what you owe right now, filing your return on time is still the smartest first step. Once your return is filed, you may be able to explore payment plans, settlement options, or other tax relief programs that can help you resolve your tax debt and move forward with peace of mind.