- Filing a federal tax return by the April deadline is an annual tradition for most Americans.
- Failing to file a tax return can result in additional costs in the form of penalties and interest.
- While not everyone needs to file, you should determine your status to avoid penalties.
Filing a tax return can be an arduous process. That's one of the reasons that Americans spend so much time and money filing their tax returns. And with frequently changing tax rules and regulations, it's understandable.
But how do you even know if you need to file a tax return? Given that avoiding filing taxes altogether could potentially save you some time, money, and stress, forgoing the annual tradition can be an attractive option. However, there are consequences for failing to file a tax return that you should be aware of.
Why filing taxes is important
Legal obligations
First things first: Do you even need to file a tax return? It's worth it to take the time to find out. A Tax Policy Center analysis finds that nearly 40% of U.S. households will pay no federal income tax for 2024.
Whether or not you have to file mostly comes down to your filing status, and how much income you earned over the course of the tax year. And it's on you to figure it all out.
"The tax system is one of self-appraisal," says David Beck, a Dix Hills, NY-based CPA. "The government relies on you to tell the truth, to pay your taxes, and file a return." And those taxes need to be paid by the tax deadline — which is April 15, during most years.
So, how do you know if you need to file a tax return? There are a lot of things to take into consideration, so it may be best to consult a professional before you decide to stand pat.
Here are some general guidelines to help you make the determination when it comes to federal filing (your state may have different rules):
- If your gross income for the 2024 tax year is less than the standard deduction of $14,600 for a single filer, $21,900 for heads of households, or $29,200 for married couples filing jointly, you do not need to file a tax return. However, you are required to file a tax return if you have $400 or more in net self-employment income. Your standard deduction is limited if you are claimed as a dependent on someone else's tax return.
- Married taxpayers who are at least 65 years old or blind can claim an additional standard deduction of $3,100 total, or $1,950 for taxpayers using the single or head-of-household filing status.
- You can make a basic determination by comparing your gross income to the standard deduction. "If your income is less than the standard deduction, there's no filing requirement," says Beck.
Funding government services
Federal taxes are collected to fund an array of government programs, services, and projects. It also helps pay off the federal debt, including interest.
According to a report from the Center on Budget and Policy Priorities, the majority of Americans' tax dollars in 2023 went toward health insurance (24%), Social Security (21%), and defense programs (13%).
Immediate consequences of not filing taxes
Failure-to-file penalty
The IRS will also hit you where it hurts: Your wallet. Again, you'll receive notice that you're being hit with a penalty by mail, and there are a number of reasons that you could potentially incur a penalty, including simply failing to file your return.
Accruing interest on unpaid taxes
Interest is in the mix, too, for those who fail to file a tax return. You'll accrue interest starting on the due date of the amount you owe, or when your tax return was due. So, you may end up paying interest on your unpaid tax, and then have to pay a penalty, plus interest on that penalty.
Loss of refund
It's also possible that the IRS may seize your state tax refund through the State Income Tax Levy Program (SITLP). The levy is meant to offset the federal taxes you may owe. In this case, the state should send you a notification of the levy, and the IRS will, too, after it takes the funds, giving you the chance to appeal.
Long-term consequences
Summons
If you forget or otherwise neglect to file a tax return, you can expect to receive a summons from the IRS — sort of a not-so-friendly reminder. Just because you didn't tell the IRS you earned money in the past year doesn't mean that your employer didn't.
If you do receive a summons, it'll be a part of the IRS collection process — that means that the IRS believes you do, in fact, owe taxes. The IRS will send you a summons via snail mail, and it will legally compel you to meet with the IRS to try and determine your tax liability.
But Beck says it's possible that you won't hear anything. However, if the IRS finds that there's been "willful neglect to file a return" on your part, the IRS can then look at your entire tax history in search of fraud — whereas typically, the IRS would only look at the past three years.
Tax liens and levies
There's also the chance that further levies could be enacted—through the Federal Payment Levy Program (FPLP). This program allows the IRS to enact a continuous levy on specific federal payments in order to collect overdue taxes.
These are the payments that could possibly be levied under the program:
- Federal employee retirement annuities: If you were a federal employee, certain annuities may be subject to levies.
- Federal payments made to you: If you were or are a federal contractor or vendor doing business with the government, these payments may be levied. Also, if you're a federal employee, your salary may be levied.
- Travel advances or reimbursements: If you're a federal employee, reimbursements for travel costs may be withheld.
- Social Security benefits: Certain benefits can be levied.
- Others: Among the other funds that can be levied, per the IRS, are Medicare provider and supplier payments, benefits paid out by the Railroad Retirement Board, and by the Military Retirement Fund.
Wage garnishments
There are procedures the IRS must follow in order to garnish your wages, including sending you a final written notice 30 days prior to garnishment. Employers must comply with the IRS, and the amount of your garnishment will depend on the unpaid debt.
Potential penalties and fees
Failure-to-file penalty rates
A failure-to-file penalty is 5% of the unpaid tax obligation for each month your return is late. This penalty can't exceed 25% of your total unpaid taxes, and will max out after five months.
After 60 days, you'll owe a minimum failure-to-file penalty of $435, or "100% of the tax required to be shown on the return, whichever is less," according to the IRS.
Failure-to-pay penalty
A failure-to-pay penalty may also be applied, and potentially reduce the failure-to-file penalty if affecting the same months.
Interest on unpaid taxes
The IRS uses the federal short-term rate (which fluctuates), plus 3%, to determine how much interest you'll owe on your unpaid taxes. The failure-to-pay penalty interest is equal to 0.5% for each month.
Special circumstances and exceptions
Filing extensions
If you are aware that you need to file a return, and simply need more time, you can always file for an extension. It's pretty straightforward: You will need to submit Form 4868 to the IRS, either online, or by mail by the filing deadline.
Payment plan
Remember that if you think that you'll end up owing the government money, you'll need to send the IRS a payment by the tax deadline regardless of whether you file an extension. You'll need to estimate your liability when you submit your extension.
If you don't think you can pay the full amount due, don't let that stop you from filing your return on time. You can file it even if you cannot pay the full amount due and request an installment agreement. If you think you're getting a refund, though, there's no need to pay, just fill out and submit the extension form.
Steps to take if you haven't filed
If you haven't filed taxes for past tax years, you may not owe a penalty if you were due a refund. However, the only way to know if you were due a refund is to file a tax return. A good rule of thumb: If you've failed to file past returns, do so as soon as possible — the IRS even has resources to help you get back on track.
If you remember to make a reasonable effort to determine whether you even need to file, and then carve out an afternoon to fill out the correct paperwork, it may not even cost you a penny to file. In fact, it may net you a refund.
Just remember: Neglecting to file a return could end up costing you more down the road than if you just bite the bullet, take the time, and file by the tax deadline. "Everyone hates it, but you gotta do it," says Beck.
Seeking professional help
Benefits of hiring a tax professional
If you have specific tax planning needs and a complex situation, an enrolled agent, tax attorney, or CPA is likely going to help you file on time, avoid mistakes, and even find opportunities for savings next year. These professionals have completed years of study and have extensive knowledge of tax law.
How to find a reputable advisor
To find a tax preparer who holds a professional credential, use the IRS directory. You can filter by zip code and the specific credentials you're seeking, including CPA, tax attorney, and enrolled agent. Also consider asking friends and family who they work with and what their experience is like.
FAQs on what happens if you don't file taxes
How long can I go without filing taxes?
You usually cannot go even a year without filing taxes. If you don't file a tax return and you owe money, you'll rack up penalties and interest with the IRS. The agency may also be able to garnish your wages or seize your property to satisfy your unpaid debts. If you don't file a tax return and don't owe any taxes, you have up to three years to claim any refund that might be due. After three years, you will forfeit your refund.
Can I negotiate penalties with the IRS?
Yes, you can negotiate penalties with the IRS. Penalty relief may be available if it's your first tax penalty or if your ability to pay or file on time was impacted by a serious illness, natural disaster, or other disruptive event.
What if I can't afford to pay my taxes?
If you can't afford to pay your taxes, the IRS offers reasonable payment plans. If you don't think you can afford your bill, don't wait. You can apply online to set up an IRS payment plan. But be wary of companies and professionals offering to eliminate your tax debt for a fee — these are often scams.