Many emergencies can come up in life, and some of them can get in the way of filing your tax return or other tax obligations on time. What happens if you don’t file taxes? You may face financial penalties that only grow your tax debt and eventually face collection actions by the Internal Revenue Service (IRS). You must address unfiled taxes as quickly as possible. While it can be stressful, ignoring it only makes the issue worse.
The Consequences of Failing to File Your Tax Return
If you owe the IRS taxes, you can see several consequences, especially if the IRS has made attempts to contact you about the debt, but you have not responded or addressed your debt. Some of the potential consequences you may see for not filing your taxes include:
Tax Penalties
The most immediate consequences of unfiled tax returns are tax penalties. On individual, trust, and estate income taxes, the IRS assessed the following civil penalties in 2024:
- 4 million delinquency penalties
- 4 million failure to pay penalties
- 3 million estimated tax-related penalties
- Nearly 593,400 accuracy penalties
If you don’t file your return, you can face failure to file or failure to pay penalties. These, and any other penalties you face, can accrue interest over time.
- Failure to file: The failure to file penalty is assessed if you don’t file your return by the deadline. On individual tax returns, this penalty is 5% of the tax due, assessed for up to 5 months of late filing.
- Failure to pay: Failure to pay the penalty is also a percentage of the tax due, up to 25%. The exact percentage depends on the type of failure-to-pay penalty.
If you are assessed both failure to file and failure to pay penalties, then the failure to file penalty is reduced by the percentage of the failure to pay penalty. The limit is still 25%.
The IRS can also assess other penalties, such as failure to deposit, bad-check, or underpayment of tax. All of these penalties, along with your principal tax debt, can accrue interest, greatly increasing your tax debt and even making it unmanageable.
Tax Property and Asset Liens
A lien is the government’s claim on your assets as collateral for the debt you owe. It can be placed on:
- Your home
- Other personal real property
- Commercial real estate
- Financial assets,
- Bank accounts.
While a lien does not necessarily mean the seizure of your assets or property, it is a possibility.
The IRS filed nearly 197,000 notices of liens in 2024. The IRS’s claim on your property or asset is visible to creditors, banks, other financial institutions, and other parties. It is publicly available information. This can increase your risk of scams, make it hard for you to get credit, and even affect your ability to find employment in certain fields.
Wage Garnishment
The IRS can garnish your wages to recover the taxes you owe by requiring your employer to remove a portion of your wages to send directly to the agency. Wage garnishment can affect many different kinds of income, like:
- Pension payments
- Governmental benefits
- Bonuses
- Commissions
- Employment benefits
- Salaries
- Hourly wages.
If you own a business or are otherwise self-employed, wage garnishment can affect your accounts receivable.
A wage garnishment can impact your income until your debt is paid in full if you do nothing, and the IRS may take other collection actions on top of garnishment. This can cause serious financial strain, especially for taxpayers who need their entire paycheck to cover bills and expenses.
Bank Levies
A bank levy occurs when the IRS freezes a bank account you own and then removes the funds from it to cover your debt. In 2024, the IRS filed nearly 313,800 notices of requested levies against third parties, including wage levies, bank levies, and more.
Any bank or financial account under your name could be subject to a bank levy when you owe back taxes. The IRS could levy multiple accounts at once to recover the full amount of your debt, which can put you in a very difficult financial situation. You could be unable to access your account for weeks before losing the money.
Revenue Officers
The IRS might assign a collection officer or revenue officer to your case. This happens in very serious cases, as the officer is tasked with securing your entire tax liability as soon as possible. This is the method the IRS uses when automatic collection methods have failed. If you have not already reached out to hire a tax lawyer, you need to do so if there is a collection officer on your case.
Criminal Charges
In the most extreme circumstances, you could be charged with tax evasion. In 2024, the IRS Criminal Investigation Program initiated 2,667 investigations into taxpayers. In the same year, the program recorded 1,571 convictions for tax-related offenses. If the IRS suspects that you have willingly refused to pay your taxes, have gone many years without filing, and cannot be reached, you could be criminally charged.
FAQs About The Consequences If You Don’t File Taxes in Florida
What Are the Consequences of Not Filing a Tax Return?
There are many consequences of not filing a tax return, including being issued penalties like failure to file, and the increasing value of your tax debt as a result of penalties and interest. If you continue not to address the debt, you can face collection actions like tax liens on your property, bank levies of your funds, and wage garnishment of your income. The IRS can eventually assign you a revenue officer. You could even face criminal charges.
What Is a Good Explanation for Not Filing Taxes?
If you have not filed taxes, you could erase certain penalties if circumstances outside of your control prevented you from filing your taxes. This is called reasonable cause penalty abatement. You still have to pay your tax debt, but penalty abatement can lower the amount owed. A good reason might be a natural disaster, a family emergency like the death or illness of an immediate family member, or an unavoidable absence like being imprisoned.
How Long Can You Legally Go Without Filing Taxes?
A: You cannot legally go any amount of time without filing taxes if you are required to file. The IRS has a deadline for collecting unpaid taxes, but it can be extended. The agency is often aggressive in recovering unpaid taxes. If you fail to file for even one year, your penalties and interests can accrue. If the IRS can’t contact you or recover the tax in your next return, then it may take other collection actions.
Q: What Is the Three-Year Rule for the IRS?
A: The three-year rule for the IRS is the amount of time you, as a taxpayer, have to collect your income tax refund after filing your tax return. If you fail to file your tax return within 3 years of the due date, you will be unable to recover it. This is one reason it is important to file your tax returns, even if you don’t have the financial ability to pay the full amount immediately.
Hire a Tax Lawyer at TaxSmith, LLC
You need to act soon to address unfiled taxes. At TaxSmith, LLC, we can help you with voluntary disclosure of your unpaid taxes, filing for an extension in the current year, and negotiating the debt you owe. Reach out to our team today.
