Need to know what happens if you don’t file your taxes for more than 5 years? We have listed the possibilities below for you.
RELATED: How to Negotiate with the IRS
In this article:
- How Long Can You Go Without Filing a Tax Return?
- Can You Go to Jail for Not Filing a Tax Return?
- Do I Have to File My Taxes Every Year?
- What Happens When a Person Fails to File an Income Tax Return?
- What If You Never File Your Taxes?
What Happens If You Don’t File Your Taxes? FAQS, Answered
How Long Can You Go Without Filing a Tax Return?
Always remember that for the IRS, there is no time limit for collecting your taxes. And, the IRS will also impose interest and penalties for every year you do not file.
This means that not filing taxes for 10 years may result in a huge amount of penalties.
But, you may ask — what happens if you do file your taxes?
As a general rule, once you file a tax return, the IRS only has ten years to go after your tax debt. This is in line with the IRS Statute of Limitations.
But this rule may be stricter, depending on your state’s tax agency. For example, in California and in New York, the IRS can collect for up to 20 years.
Note the following certain conditions that could suspend IRS collections:
b. Offer in Compromise or any Installment Agreements
c. Collection Due Process (CDP) Hearing
d. Taxpayer Assistance Order
e. Living abroad for 6 months
f. Military deferment
Statute of Limitations Definition: The Statute of Limitations is the required time period by the IRS in which they resolve tax-related issues. Any review beyond the Statute is not valid or binding to the taxpayer anymore.
Can You Go to Jail for Not Filing a Tax Return?
If a taxpayer doesn’t file his or her tax return to purposely evade taxes, then he or she can go to prison.
The IRS will prosecute a taxpayer if there is evidence that he or she committed tax fraud. It can pursue tax fraud charges for up to 6 years after the date of the unfiled return.
As examples, a taxpayer who does any of the following can be charged with tax fraud:
a. Declares false tax exemptions or deductions
b. Attempts to bribe anyone with kickbacks from avoiding tax payments
c. Submits false or altered documents to the IRS
d. Not reporting or misreporting income statement to the IRS
e. Joins an organized crime to purposely evade taxes
f. Fails to withhold taxes for employees
g. Steals someone’s identity or Social Security Number (SSN)
h. Spreads fraudulent IRS e-mails
i. Evades taxes through an exempt organization
j. Other suspicious activities
What happens if you don’t file your tax return due to fraud? The IRS will impose criminal charges with penalties depending on your state.
The IRS highly encourages everyone to report anyone who engages in any of the aforementioned activities.
But, you may also ask — what happens if you don’t file your taxes because of an honest mistake? This means that if you did not file because you simply didn’t have the money to pay, you won’t necessarily go to jail.
Always remember that if you only committed honest mistakes, then you don’t have to worry. The IRS may offer you a payment extension or a payment plan.
To help you avoid all the penalties, we can share with you these tips on filing taxes late.
Tax Fraud Definition: Tax fraud occurs when a taxpayer intentionally falsifies information and engages in wrongdoings for the specific purpose of evading the payment of taxes.
Do I Have to File My Taxes Every Year?
Another example of a frequently asked question is this: What happens if you don’t file your taxes annually?
As a guide, we noted for you these 3 factors in determining whether or not you are required to file:
Your tax threshold will depend on your age at the end of the year.
Taxpayers who are 65 years old and above have slightly higher tax thresholds. This will depend on their income.
But, if you turned 65 on New Year’s Day, then you are considered to be 65 at the end of the previous year.
Annual gross income thresholds per filing status
Also, as a general rule, if your gross income for the year exceeds the threshold, then you are required to pay taxes.
This is also according to your filing status, which could be any of the following:
b. Head of household
c. Married couples filing jointly
d. Married couples filing separately
e. Qualifying widow/widower with a dependent child
Income Thresholds – younger than 65 years old
For single taxpayers younger than 65 years old, the threshold is $10,400. If you are the head of a household, the threshold is $13,400.
Married couples filing jointly have a shared threshold of $20,800. On the other hand, married couples filing separately have a threshold of $4,050 each.
And lastly, widows or widowers with dependent children have a threshold of $16,750.
Income Thresholds – 65 years old and older
Single taxpayers 65 years old or older have a threshold of $11,950. If you are the head of the household, then the threshold is $14,950.
On the other hand, married couples who are filing jointly have a shared threshold of $23,300. Couples filing separately have an individual threshold of $4,050.
And lastly, the threshold for qualified widows or widowers who have a dependent child is $18,000.
Tax Threshold Definition: A tax threshold represents the minimum amount of taxes you are required to file, as based on the three factors above.
What Happens When a Person Fails to File an Income Tax Return?
In line with the tax filing season, you may also ask: What happens if you don’t file your taxes on or before April 15?
As a general rule, don’t forget that you will incur a penalty for not filing taxes, called failure-to-pay penalty.
This penalty is usually 5% of the unpaid taxes. The penalty charge will not exceed 25% of your total taxes owed.
But, if you filed your tax return 60 days after the due date or the extended due date, then you might have a bigger penalty.
Your penalty will now be the smaller of $135 or 100% of your total tax debt. This will accrue beginning on the day after the filing date.
Also, the IRS will charge you a failure-to-pay penalty if you fail to pay your declared taxes. This is usually ½ of 1% of your total taxes owed.
If you are facing both types of penalties, then the maximum penalty you need to pay for both is 5% of your tax debt.
But don’t worry, we have prepared a tax preparation checklist for you so you can start planning your taxes early.
What If You Never File Your Taxes?
Always remember that the consequence for not filing a tax return ever will depend on your reason.
As a reminder, if you did not file your tax return for a specific year, the IRS will first send you an IRS Collection Notice. This will indicate your tax due amount and deadline.
But if you cannot afford to pay taxes, then don’t worry. You can respond to the IRS by declaring bankruptcy.
Although, if you did not declare any reason, or if you forgot to file taxes, then the IRS may file a Substitute for Return.
The IRS will use any financial or non-financial information available to them to begin their assessment. Their assessment may lead to any the following:
a. Federal tax lien
b. Federal tax levy
c. Forfeiture of tax refund
d. Charges of tax evasion
e. Revocation of passport
Substitute for Return Definition: The Substitute for Return is a type of tax return the IRS files for you if you do not file a tax return. This is based on the information that they have.
So what happens if you don’t file your taxes? The IRS can certainly impose a number of penalties on you, but the agency also finds ways to aid you in making those payments.
Always remember that as long as you try to be transparent to the IRS, then your back taxes filing will end in a favorable outcome.
What are your tips to be able to file taxes on time? Share your insights below!
If you owe back taxes, visit taxreliefcenter.org for more information on tax relief options.