What Happens When You Decide Not to File When Taxes are Owed

file taxesYou may have been busy or decided you would just skip filing an income tax return a few years ago. Then it became a habit, and you have not filed in three years—is this a problem? Short answer? “Yes,” if you owed taxes in any of those years.


Every year a certain percentage of taxpayers fail to file their income tax returns. Their actions might be driven by a belief that taxes are unjust, or they are confused about the process, while some even forget. Whatever the reason, failure to file when taxes are due is a costly error.


Consider these points about what happens when required returns are not filed on time:

  • Taxpayers who owe money may put off filing their taxes until they can pay the obligation—or at least put down a significant part of it. There are two components of a tardy tax return on which taxes are due. One is a failure-to-file penalty, and the other is the failure-to-pay.
  • A taxpayer who owes money will be charged a failure-to-file penalty of five percent of the tax obligation each month. The penalty tops out at 25 percent of the unpaid obligation. Keep in mind, this is the penalty for not filing—not the penalty for failure to pay. Because of this particular penalty, taxpayers who know they cannot pay their tax debt are advised by the Taxpayer Advocate to either file the return or request an extension on filing. Even if you do not owe a substantial amount, the failure-to-file penalty can add up quickly. If the return is 60 days late, the minimum failure-to-file penalty is 100 percent of the taxes owed—or $435, whichever is less.
  • Failure to pay penalties accrues as long as the tax debt is unpaid. While filing your return or obtaining an extension can stop or deter a failure-to-file penalty, the failure-to-pay penalty continues to grow until the amount owing is paid. The penalty is one-half of one percent per month, up to a maximum of 25 percent.
  • Interest is charged on these penalties at a rate that is determined on a quarterly basis.


Owing the IRS is expensive. If you already owe the IRS, or are part of the approximately five percent of taxpayers who failed to file during the 2022 tax season, consider working with the IRS on a payment plan or other options. If your tax liability is considerable, speak with an experienced tax attorney to better understand how to approach the IRS about your situation.


Skilled tax attorneys help you with tax controversy, failure to file, and allegations of tax fraud

Representing local, national, and international clients, the tax attorneys at Robert J. Fedor, Esq., LLC provide strong representation on matters of criminal tax defense, FBAR issues, and tax litigation. Call 800-579-0997 or contact us today.


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