What Happens if You Don’t File Taxes? Can You Go to Jail for Not Filing Taxes? Your Worst Case Scenarios Explained
2023's deadline will be here before you know it.
Tax Day is coming (Tuesday, April 18, 2023!), and it's not fun for anyone—not even the Internal Revenue Service (IRS). It's a necessary evil, and no matter how much of a nuisance the paperwork can be, nor how much of a philosophical opposition you may have to taxation (we're looking at you, Libertarians), you have to file your taxes. What happens if you don't file taxes? As it turns out, absolutely nothing good—and, potentially, a whole lot of bad.
Please note that the information presented here is for general educational purposes only. If you're in hot water (or think you might be), speak with a lawyer or an accountant to see what your specific options are.
What happens if you don't file taxes?
The IRS will likely send you a summons.
Whether you forgot to file your taxes, just didn't feel like filing your taxes, or had more sinister (and potentially criminal) reasons for not filing your taxes, the IRS will likely send you a written summons in the mail to remind you to do it. This is especially true if you owe the IRS money in taxes. The summons will often mandate a meeting with the IRS.
The IRS will charge a penalty for failing to file taxes.
If you don't file federal taxes, you'll be slapped with a penalty fine of 5% of your tax debt per month that they're late, capping at 25% (in addition to however much money you may owe to begin with). In the second month of failing to file, you may also be subjected to an additional fine of $435 or your total taxes owed—whichever is less. You'll also face an additional 0.5% failure to file an interest fee for each month you miss.
The IRS will occasionally grant exceptions and forgive failing to file, but those cases are rare and chances are you wouldn't want them to apply to you: Examples of exemptions include a death in the family, serving in the military or natural disasters. Some coping with natural disasters may get automatic exemptions and extensions for filing taxes, but not everyone—so be sure to check on your behalf.
Related: 10 States Where People Pay the Most Taxes
You may owe interest if you don't file your taxes.
Not filing your taxes may well cost you extra, because you may owe interest on your tax debt—and that interest adds up fast. Your interest will be based on the federal short-term interest rate, plus an additional 3%—and the interest compounds daily.
The IRS may file your taxes for you—without perks.
In some cases, if you don't file your taxes, the IRS may file a Substitution for Return (SFR). This means your taxes will be filed in accordance with what you may owe, but you likely won't see deductions, exemptions, or credits applied, according to FindLaw. The IRS will mail you a notification of the SFR, and if you fail to respond to it, you'll then receive a notice of "deficiency"—and you can be subject to serious penalties like levies or liens on your property.
You may not get a tax refund if you don't file your taxes.
Most people don't owe taxes at tax time—in fact, for most people filing, the government and IRS owe them refunds. However, if you don't file your taxes, you'll never know if you're eligible to get any of your own hard-earned money back. What's more, if you want three or more years to file taxes, you'll end up forfeiting your tax refund outright. Don't let this be you!
The IRS may hit you with a lien or levy on your property and assets.
If you owe taxes, the IRS can put a lien on basically any and everything you own, including your bank accounts, Social Security payments, home, and vehicles. If you sell any of your property, the IRS may be entitled to any and all of the proceeds depending on how much taxes you owe. This can also severely hurt your credit score, making it hard to get loans or lines of credit in the future until the issue is resolved.
Related: Tax Day Freebies, Discounts and Deals to Ease the Stress and Burden of Your Tax Filing Deadline
How many years can you go without filing taxes?
You should file your taxes every single year.
Can you go to jail for not filing taxes?
Keep in mind that not paying your taxes is much different from not filing your taxes. If you make an innocent error in your tax filing, you may be subject to a civil judgment, but you won't have a criminal record for it.
It's rare, but you may face time behind bars if you deliberately evade tax filing and payment. Filing a fraudulent tax return can land you in the Big House, as can helping someone else avoid filing taxes. You can also land in jail for failing to file taxes (expect a year behind bars for each year's taxes you didn't file). That said, if you file your taxes but can't pay, the IRS is much more likely to be lenient and work with you on a repayment plan. You may also opt for a settlement (called an offer in compromise). In any case, speak to an accountant or lawyer to determine what's best for you.
How far back can the IRS go for unfiled taxes?
The IRS typically won't look much further than six years for enforcement of unfiled taxes, according to IRS Mind. However, it's important to note that if you don't file taxes, the IRS will likely catch up to you within three years of your missed tax filing deadline.
Next, check out these Tax Day memes to get a chuckle out of what is usually a headache!
