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What if I Never Filed Taxes and Don’t Owe Anything?
What if I Never Filed Taxes and Don’t Owe Anything?
If you’ve never filed taxes before and don’t think you owe any money, you might be wondering – do I really need to file taxes at all? It’s a fair question. After all, why go through the hassle of filing taxes if you don’t owe anything and aren’t getting a refund, right? Well, there’s a bit more nuance to it than that. Keep reading and I’ll explain everything you need to know about what happens if you don’t file taxes when you don’t owe any money.
Do I Have to File Taxes if I Don’t Owe Anything?
The first thing to understand is that the IRS has rules about who has to file taxes each year and who doesn’t. Just because you don’t think you owe any money doesn’t automatically mean you’re off the hook. Here are some key factors that determine whether you have to file:
- Your income – There are minimum income thresholds you have to meet before you are required to file. For 2022 taxes, the threshold for single filers under age 65 is $12,950. So if you earned less than that, you may not have to file.
- Your age – The income thresholds are lower for seniors. For 2022 taxes, the threshold for single filers age 65 or older is $14,700.
- Type of income – If you have self-employment income over $400 you have to file no matter what. The same is true for earnings from investments and other sources.
- Dependents – Even children or adult dependents claimed on someone else’s return may have to file their own return if they meet income requirements.
The bottom line is that you should check IRS Publication 501 each year to see if you meet the filing requirements. Just assuming you don’t have to file could get you in trouble if you’re wrong.
What Happens if You Don’t File Taxes and Don’t Owe Anything?
If you aren’t required to file taxes for the year, there are no penalties or consequences for not filing. The IRS won’t come after you or charge you any failure-to-file penalties in that scenario. But there are still a few potential downsides to be aware of:
- You won’t get any refund you might be owed – If your employer withheld taxes from your paycheck, you could get that money back by filing a return.
- You miss out on credits – Not filing means you don’t claim credits like the Earned Income Tax Credit that could result in a refund.
- It raises red flags – Not having a filing history could make it harder to get loans, mortgages, etc. in the future.
For those reasons, even if you aren’t required to file, it’s often smart to go ahead and submit a simple return anyway if you have any earnings at all. That way you don’t miss out on any refunds and start establishing a clean filing record.
What If I Don’t File and I Do Owe Taxes?
This is where things can get really messy. If you are required to file taxes for the year but you don’t, you can face some steep penalties and consequences. Here are some of the main issues that can come up:
- Failure-to-file penalty – You’ll be charged a penalty of 5% of the unpaid taxes for each month the return is late, up to 25% of what you owe. This penalty can add up fast.
- Failure-to-pay penalty – If you don’t pay the taxes you owe on time, you’ll also face a penalty of 0.5% per month on the unpaid amount, up to 25% again.
- Interest charges – Any unpaid taxes and penalties will have interest tacked on by the IRS, which can really make your bill snowball.
- Tax lien – The IRS can put a lien on your property in order to get the taxes you owe. This also damages your credit.
- Levies – The IRS can levy your bank account or wages to forcibly collect what you owe in taxes.
As you can see, not filing when you do owe taxes can create a real mess. The IRS has powerful tools to collect what you owe, like garnishing wages, seizing assets, and emptying bank accounts. So don’t try to avoid filing if you owe taxes – file an extension if you need more time, but make sure you eventually file and pay what you owe.
When Do Failure-to-File Penalties Kick In?
If you are required to file taxes but you don’t file on time, the failure-to-file penalties start accruing right away. Here are some key dates to be aware of:
- April 15 – This is the standard IRS tax filing deadline each year. If you don’t file by this date, penalties start on April 16.
- October 15 – If you file an extension by April 15, your new deadline is October 15. Penalties will kick in on October 16 if you still haven’t filed.
- Consecutive years – If you don’t file for multiple years in a row, you’ll face penalties for each year.
The IRS tends to get more aggressive with penalties the longer you go without filing. If you’ve missed filing your taxes for several years, it’s best to get caught up as soon as possible. The penalties add up over time and become more painful.
Can I Get Penalty Relief?
If you failed to file your taxes on time and got hit with penalties, the IRS may grant you relief in certain cases. Some common reasons penalties can be waived include:
- Financial hardship – If you can prove you couldn’t afford to pay your taxes on time.
- First-time offense – If it’s your first time ever missing a filing deadline.
- Natural disaster – If something like a hurricane, fire, or flood prevented you from filing on time.
- Death or illness – If you or an immediate family member experienced severe illness or death.
You’ll need to submit a request to the IRS explaining your reasonable cause for missing the deadline. Make sure to include documentation that backs up your explanation. The IRS will review your request and let you know if they approve penalty relief or not.
The Bottom Line
Not filing your taxes when you’re required to do so can lead to some steep penalties, interest charges, and other problems with the IRS. But if you aren’t required to file and don’t owe any taxes, you generally don’t have anything to worry about if you don’t file. The risks and potential consequences vary dramatically between the two scenarios. If you’re not sure what category you fall into, it’s always smart to consult a tax professional who can review your situation and offer the right advice.
Taxes aren’t always simple and straightforward. But taking the time to understand your responsibilities as a taxpayer can help you avoid unnecessary penalties and make smart filing choices each year. Knowing what happens if you don’t file when you don’t owe any taxes is part of being an informed filer. With the right information, you can successfully navigate your unique tax situation and stay compliant with the IRS.