Consequences of Not Filing Your Tax Return

Filing your tax return is a legal requirement for most individuals and businesses. Failing to do so can result in a variety of penalties and consequences from the IRS.

Penalties for Not Filing

What happens if you fail to file your tax return?

If you do not file your tax return by the deadline, the IRS can assess a failure-to-file penalty. This penalty is typically 5% of the unpaid taxes for each month or part of a month that a tax return is late, up to a maximum of 25%. In addition to penalties, interest will accrue on any unpaid taxes from the due date of the return until the date of payment.

What happens if income tax return is not filed?

Not filing your income tax return can lead to more than just financial penalties. The IRS may file a substitute return on your behalf, which often does not include deductions or credits you may be eligible for, resulting in a higher tax bill. Continued failure to file can result in the IRS taking collection actions such as wage garnishment, bank levies, or placing a lien on your property. In extreme cases, criminal charges may be pursued for tax evasion.

IRS Time Limits and Rules

What is the 3 year rule for the IRS?

The IRS generally has three years from the date you file your return to audit it or assess additional taxes. This is known as the "three-year rule." However, if you fail to file a return or file a fraudulent return, there is no statute of limitations, and the IRS can take action at any time.

How far back can you get in trouble for not filing taxes?

If you have not filed a tax return, there is no statute of limitations for the IRS to assess taxes or pursue collection. This means you can be held responsible for unpaid taxes from many years ago. The IRS typically requests returns for the last six years if you are trying to get back into compliance, but they can go back further if necessary.

How to Resolve Unfiled Tax Returns

If you have unfiled tax returns, it is important to file them as soon as possible. The IRS offers options for payment plans and may reduce penalties if you come forward voluntarily. Consulting with a tax professional can help you navigate the process and minimize the consequences.