Home Blog What Happens If You Don't File Taxes (All You Need To Know)

What Happens If You Don’t File Taxes (All You Need To Know)

Wondering What Happens If You Don’t File Taxes?

What are the consequences of not filing taxes? 

What’s important to know?

Keep reading as we have gathered exactly the information that you need!

Let me explain to you what could happen if you don’t file your taxes!

Are you ready?

Let’s get started!

What Happens If You Don’t File Taxes

Most people are required to file taxes at the end of the year to report their income and earnings to the tax authorities so to establish their overall tax liability.

Although most people are required to file their taxes, some may be exempt from doing so depending on their tax filing status and age.

It’s important that you properly analyze your personal circumstances to see if you are required to file taxes or not.

Now, you are here because you want to know what happens if you don’t file your taxes.

There are essentially two scenarios that can apply to you, you don’t file your taxes and you are exempt from filing an income tax return or you don’t file your taxes but you’re required to file an income tax return.

Let’s look at both scenarios to see what could happen.

Recommended article: How much do you have to make to file taxes

You Are Below Minimum Income Threshold

The first scenario is that you don’t file an income tax return and you’re below the minimum income threshold established by the IRS for filing taxes.

For instance, if you’re a single filer, you are below the age of 65, and made less than $12,550 in the year, you are not required to file taxes.

Similarly, if you are filing your taxes jointly with your spouse, you are both below the age of 65, and you made less than $25,100, you are not required to file your taxes.

According to the IRS, in the year 2021, you must file taxes if you are in the following tax status and have earned a minimum income:

StatusBelow 65 Years65 Years And Over
Single$12,550$14,250
Married, filing jointly$25,100 both spouses under 65$27,800 both spouses are 65 or older
$26,450 one spouse is under 65 and one is 65 or older
Head of household$18,800$20,500
Married, filing separately55
Qualifying widow(er)$25,100$26,450

If you meet the conditions not to file taxes and you don’t file taxes, you will not be penalized by the IRS.

In other words, you will not have the IRS on your back.

However, you may potentially lose tax refunds or refundable tax credits that you would have been eligible to receive by filing your taxes.

In some cases, you may have had some taxes withheld during the year and by not filing your taxes, you will not be able to claim them back.

Recommended article: What is tax evasion

You Are Above Minimum Income Threshold

The second scenario is that you are above the minimum income threshold or you have a special situation requiring you to file taxes.

In that case, you are required to file your taxes.

If you choose not to file your taxes, you can expect the IRS to take different measures to ensure you do so.

The IRS has different ways they can compel you to file your taxes ranging from the assessment of penalties, fines, and interest all the way to registering tax liens against you.

In the most extreme cases, the IRS may even pursue you for tax evasion which could have severe financial and legal consequences.

Keep reading as I will further break down the different measures the IRS can take to have taxpayers file their taxes.

Recommended article: What is an adjusted gross income

Consequences For Failure To File Taxes

You Don’t File Taxes But You Are Owed A Refund:

If you are required to file taxes and you don’t, you can be exposed to a series of adverse consequences that may be financial or legal in nature.

The first aspect that you should keep in mind is that if you don’t file your taxes and you are owed a refund by the IRS, you will not have a penalty imposed against you by the IRS.

However, you are exposed to the risk of losing your right to obtain the refund.

You should also keep in mind that if you don’t file your taxes within three years of when it was due, you will forever lose your right to the refund due to the application of the statute of limitations.

You Don’t File Your Taxes Prior To Filing Deadline:

If you are required to file your taxes and you miss the filing deadline, then you are likely to be exposed to a “Failure to File Penalty”.

The Failure to File Penalty is typically a 5% penalty the IRS will charge on top of your tax liability for every month your tax return filing is late.

This penalty can go all the way up to 25% of your total unpaid taxes.

For example, if you owe the IRS $1,000 and you file late by two months, you will have to pay $1,102.50 representing a 5% penalty applied to your tax liability.

You will find out that the IRS is claiming a Failure to File Penalty via a letter sent to you through the mail.

You Refuse To File Taxes:

If the IRS has applied A Failure to File Penalty and you still do not file your taxes, the IRS can take additional steps in forcing you to pay.

Depending on the severity of your refusal to file your taxes will lead the IRS to either enforce a tax lien against your property, file a civil lawsuit against you, or require a criminal investigation to be done.

In some situations, the IRS can file a “substitute return” for you where it will file an income tax return for you and assess you based on what it considers to be your income.

It will also disqualify you from receiving any tax credits and will not allow you to make eligible tax deductions.

The net result is that you are assessed the highest possible income leading to the highest possible tax liability and you will have to pay the interest and penalty on top of that.

Recommended article: How to file taxes

What Happens If You Don’t File Taxes FAQ

What happens if I can’t afford to pay taxes at this time?

If you can’t afford to pay the taxes that you will be required to pay when filing an income tax return, you can work with the IRS to find a tax payment plan allowing you to pay your taxes in installments.

The IRS allows you to spread out your tax obligations over a certain period of time.

You are better off filing your taxes and working out a payment plan with the IRS than not filing your taxes and ending up with a higher tax bill that you will most certainly not be able to pay.

Should I file an income tax return if I’m exempt from doing so?

The answer is that it depends.

If your tax filing status, age, and income threshold qualify you not to file your income tax return, you will not get in trouble for not filing your return.

However, if you don’t file your return, you won’t be able to claim any tax refunds, refundable credits, or reimbursement of taxes that were withheld from you during the year.

What happens if I file my tax return after the tax filing deadline?

If you file your income tax return after the filing deadline, the main consequence you’ll be exposed to is to pay late interest charges and a penalty to the extent you owed the IRS money.

The late filing penalty is 5% of your total taxes owed and can go up to 25% of your tax liability.

This amount is charged for every month that you are late.

What should you do if you are late in your tax filing?

If you fell behind in filing your taxes, you should find a way to remedy the situation to avoid being charged further interest and penalties.

Filing your taxes can also prevent further actions taken against you by the IRS.

The first thing you should do is assess how much taxes you owe the IRS. 

You can ask for your tax transcript so you can see what information the IRS has on hand for you.

Once you know how much you owe, you should file your taxes.

If you can’t afford to pay your tax liability, see if you can negotiate a payment plan with the IRS.

Recommended article: Understanding income taxes

Takeaways 

So there you have it folks!

What happens if you don’t file your taxes?

That’s a question that many taxpayers ask.

In a nutshell, for the majority of people, not filing taxes will result in adverse consequences, such as interest charges, penalties, tax liens, loss of tax credits and refunds, and forced collection attempts by the IRS.

For a small group of people, the consequence can be less severe if their filing status, age, and income exempt them from filing their income tax return.

If you are late in filing your taxes or need tax advice, be sure to consult with a qualified tax attorney.

Now that you have a better idea of what can happen if you don’t file your taxes, good luck with your research!

Tax lien
Substitute for return
Failure to File Penalty
First Time Penalty Abatement
Online Payment Agreement
Tax penalty relief 
Back taxes 
Tax extension 
Notice 433
Tax fraud
Author
Editorial Staffhttps://lawyer.zone
Hello Nation! I'm a lawyer and passionate about law. I've practiced law in a boutique law firm, worked in a multi-national organization and as in-house counsel. I've been around the block! On this blog, I provide you with golden nuggets of information about lawyers, attorneys, the law and legal theories. Enjoy!

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