What Happens If You Don't File Your Tax Return?

What should you do if you "forget" to file your tax return with the IRS? And, even more important, what will the IRS do to you? Read on to find out the consequences and your options if you fail to file a tax return.

Consequences of Failing to File a Tax Return

If you fail to file a tax return or contact the IRS, you are subject to the following:

Penalties and Interest

Penalties and interest will be assessed and will increase the amount of tax due You'll have to pay the IRS interest of .5% of the tax owed for each month, or part of a month, that the tax remains unpaid from the due date until the tax is paid in full or the 25% maximum penalty is reached. The interest rate increases to 1% if the tax remains unpaid 10 days after the IRS issues a notice of intent to levy.

You'll also owe a late-filing penalty, which is usually 5% of the tax owed for each month or part of a month that your return is late, up to five months. If your return is over 60 days late, the minimum penalty for late filing is the smaller of $485 (2024) or 100% of the tax owed.

No Credits Toward Social Security or Disability

If you're self-employed, you will not receive credits toward Social Security retirement or disability benefits. Failure to file results in not reporting any self-employment income to the Social Security Administration.

A Substitute Return Will Be Filed

The IRS will file a substitute return for you. But this return is based only on information the IRS has from other sources. So, if the IRS prepares this substitute return, it will not include any additional exemptions or expenses you might be entitled to and might overstate your real tax liability.

Collections

Once the tax is assessed the IRS will start the collection process, which can include placing a levy on wages or bank accounts or filing a federal tax lien against your property.

File Your Return ASAP

You should file your return as soon as possible and pay all the tax that is due, if any. You'll save money by doing so because the IRS late penalty and interest charges are calculated from the date your return was due (April 15), so the earlier you file, the less you pay.

File Your Return Even If You Can't Pay What's Due

If you can't afford to pay all the tax that is due, you should still file and pay as much as you can. By paying as much as possible now, the amount of interest and penalties you'll owe will be lessened.

Paying With an Installment Agreement

You can enter into an installment agreement with the IRS, which is an agreement between you and the IRS to pay the amount due in monthly installment payments. You must first file all required returns and be current with estimated tax payments.

Most people qualify to use the Online Payment Agreement application at www.irs.gov. However, if you owe more than $50,000 (or $25,000 for businesses), you will have to negotiate with a live person and most likely have to submit a financial statement on IRS Form 433-F.

Getting Help If You Haven't Filed a Tax Return

If you need help filing a tax return, talk to a tax professional, such as a certified public accountant or a tax attorney. A tax professional can prepare tax returns or provide tax information, guidance, or representation before the IRS.