What Happens If One Does Not File an Income Tax Return?

by Kristen May

Federal income tax returns are due every year on April 15, or the following Monday when the date falls on a weekend or holiday. It's your responsibility to file each year, and if you don't, you will face financial and other consequences. The IRS takes several measures against people who don't file their income tax returns.

Filing an Extension

All taxpayers are eligible for a six-month extension for the current year's tax return. All you have to do is file Form 4868 by tax day, usually April 15, to extend your deadline by six months. Filing an extension waives the late filing fee if you file your tax return by October 15. If you paid at least 90 percent of your taxes for the year before April 15, the IRS also waives the late payment fee, provided you pay the balance when you file by October 15.

No Refund

If you don't make much money, you may not actually be required to file a tax return. The IRS provides specific filing requirement thresholds on its website, and most people need to file if they have a gross income of $9,500 or more. However, even if you don't have to file a tax return, you can still choose to file because you had federal income tax withheld from your paychecks and want to claim the refund. In addition, if you qualify for the Earned Income Tax Credit for people with low incomes, the only way to get the tax credit is to file and receive it as a refund. If three years pass and you still haven't filed, you forfeit your refund and tax credits.

Late Fees and Penalties

The IRS imposes penalties on individuals who owe taxes and fail to file or pay their taxes on time. The late filing penalty is 5 percent of the tax due per month, up to a maximum of 25 percent. The late payment penalty is generally 0.5 percent per month, up to a maximum of 25 percent. If you're on an installment agreement, it's only 0.25 percent per month, and if you received a notice of intent to levy, it's 1 percent per month. In addition to the late payment penalty, you have to pay interest on the unpaid balance, with a rate of 3 percent plus the federal short-term rate. Interest is compounded daily, so it can add up significantly if you leave your bill unpaid for years.

IRS Prepares Return

If the IRS has information showing that you owe taxes and should have filed a tax return but have failed to, the IRS will prepare it on your behalf. However, the IRS uses only the information it has, which generally does not result in the most advantageous filing. For example, the IRS will file separate returns for a husband and wife and will not include any deductions or tax credits. The IRS will then send you the return and the bill, including the late filing penalty, late payment penalty, and any accrued interest.

Federal Tax Liens

The IRS eventually imposes collection measures if you fail to pay your taxes. In addition to sending notices in the mail and calling to collect, the IRS can issue a federal tax lien or levy. A lien is when the government places a claim on your property, often your home or vehicle. The lien appears on your credit report and lowers your score, making it more difficult for you to obtain credit at a reasonable interest rate. In addition, if you sell the property before paying your tax bill, the government will take what you owe before you get any proceeds from the sale.

Federal Tax Levies

A tax levy is like a lien, but it allows the government to actually seize your assets. The government can issue a levy on your property, bank accounts, or wages. If the government levies your wages, your employer must send a percentage of each paycheck to the IRS to pay your tax bill until it's paid in full. This is also called wage garnishment.


Although it is rare, the IRS does have the power to bring criminal penalties against taxpayers who fail to file their returns. You can be brought to trial and potentially face one year or more of jail time if you are found guilty of tax evasion, fraud or the willful failure to file a return or pay your tax bill.

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