What Happens If I Don’t File My Tax Returns?

The law obligates every citizen to pay taxes to the IRS if their income satisfies a certain threshold. Only dependents are exempted from this rule. Similar to any other rule, filing tax returns is mandatory; there are no other ways about it. Failure to file tax returns at the stipulated time often has dire consequences, mainly criminal penalties such as fines, lines and in some cases, incarceration.

Nowadays, the IRS adopts a welcoming approach, a factor that significantly encourages individuals to file their returns. Furthermore, from an economic perspective, failure to file your tax returns in time is substantially expensive in the long term as compared to filing and paying the owed amounts.

As mentioned earlier, the implications of failing to file your tax returns transcend beyond hefty fees, regardless of whether the action was intentional or unavoidable. The ramifications of tax evasion and fraud are several, but the following are the most prevalent.


Undoubtedly, taxes are the cornerstone of any government’s income, irrespective of its economic status. Thus, tax collection is a critical issue that is often prioritized by several administrations. It is, therefore, logical to expect the imposition of mild to hefty penalties, depending on the amount of money you owe the government concerning taxes.

Presently, the national deadline for filing tax returns is April 15 (unless you file an extension). Immediately after the elapsing of this period, the IRS automatically starts imposing penalties and fines on non-filers. Currently, the charges stand at $100 or an incrementing 5% of the monthly unpaid taxes, with a higher limit of 25%. This law applies to taxpayers who entirely fail to pay and register their owed taxes and returns respectively.

Individuals who file their returns on time (before April 15) but are unable to pay the tax debts are granted a bit of reprieve by the IRS. Instead of paying the standard 5% incremental monthly penalty, they are required to pay a relatively mild penalty ranging from 0.5% to 1%. Therefore, it is also economical to file your returns on time, even if you are unable to raise funds at the time.

Collection Activity

The IRS usually grants a grace period for tax defaulters who have neither filed returns no pay tax debts over a prolonged time. Once this time frame elapses, the IRS has the power to initiate serious collection activity. This can be done using multiple methods, including:

• Tax liens – the IRS has the rights to invoke the ‘Notice of a Public Tax Lien’. This document permits the tax watchdog to seize, freeze and even auction personal property in exchange for the amount owed as tax debts.

• Bank levies – in some cases, the IRS can contact the taxpayer’s bank or other personal financial institutions so that a levy of the defaulter’s bank account can be initiated. This allows the taxman to confiscate amounts equaling the overdue tax debts and the resultant penalties.

• Wage garnishment – in this instance, the IRS establishes direct contact with the tax evader’s employer. By doing this, the IRS ensures that your salaries are redirected to paying the owed amounts until the debt is zero.

Arrest and Imprisonment

By virtue of being law, failure to adhere to the obligation of filing returns and paying tax debts warrants a civil investigation. Usually, the IRS resorts to this kind of action after initial attempts such as warning letters and sending collection representatives prove futile. This investigation is often conducted by highly-skilled IRS investigators, who have an ingrained ability to ascertain the credibility of defaulting taxpayer’s excuses.

Depending on the outcome of the interrogation, the IRS may either pursue or dismiss the filing of tax evasion charges in the US Tax Court. It is important to note that tax evasion is a severe criminal offense that has adverse ramifications, including a tedious and expensive litigation process, a tarnished credit record and worse, a criminal record. According to the current law, a convict of tax evasion charges may be required to either pay a fine amounting to $25,000 or serve a jail term of 12 months.

Delayed Reimbursements

In some instances, certain individuals wait until after the deadline to file returns and pay tax debts. This is despite the fact that they had the money way before the deadline. While such cases are not typically subjected to the hefty fines resulting from tax evasion, the IRS has a more subtle way of ‘repaying’ the inconveniences such people cause.

Often, the IRS resorts to withholding tax refunds belonging to individuals who file returns and pay tax debts after the deadline elapses. People colloquially refer to this scenario as an interest-free loan to the government, since they render economic injustice without giving any profit to the lender (the taxpayer). Fundamentally, your money is being used by the government to make profits, instead of profiting its owner.

Loss of Tax Refunds

As if withholding your tax reimbursements is not sufficient, the IRS can forfeit this process entirely. As of now, the standard window granted to taxpayers to claim money the IRS owes them in the form of tax refunds is set at three years. Notably, individuals who opt to claim tax refunds often undergo lengthy and cumbersome procedures that involve large amounts of documentation. Essentially, the IRS is in no hurry to process the reimbursements.

Once the three-year window closes, the IRS considers the unclaimed tax refunds as a charitable ‘donation’ to them by the taxpayer. Therefore, the regulatory authority is not obligated to refund the money and can proceed to use it by any means it deems worthwhile. 

Unfortunately, a considerable portion of the populations considers a critical task such as filing of returns and paying of tax debts trivial. Nevertheless, the weightiness of such a matter cannot be underestimated, especially given the repercussions that accompany it. Whether deliberate or unintentional, failure to comply with this regulation attracts adverse implications, including hefty fines and possible criminal prosecution.

Contact a Tax Attorney

If you are in a situation where you owe back taxes you need professional help.  Contact Ayar Law for a free confidential consultation at 248.262.3400.

Venar Ayar, Esq.

Venar Ayar, Esq.

Attorney-at-Law, Master of Laws in Taxation
Principal and founder, Ayar Law

Venar is an award-winning tax attorney ranked as a Top Lawyer in the field of Tax Law. Mr. Ayar has a Master of Laws in Taxation – the highest degree available in tax, held by only a small number of the country’s attorneys.