Allison Martin, Bankrate.com
The taxation deadline is usually April 15th each year. If that deadline is not possible, it is easy to get a six-month extension to submit a return, but tax payments are scheduled for April 15th.
But what happens if I don’t file my taxes through any of these deadlines? The outcome will vary very much depending on whether you are expecting a tax refund or whether you are owing IRS money.
What happens if I haven’t submitted it and I haven’t borrowed any taxes?
If no tax has been paid or a refund has been paid, there will be no penalty for not filing a tax return. However, you will not receive a refund until you run the file.
There is no penalty for late application. Get your documents with the IRS so that you can process your taxes and issue a refund. You are up to three years after your return date to request a refund of your taxes.
Most Americans receive a tax refund after filing their tax returns. This happens because you have paid more taxes over the year than you owe. In many cases, this will withhold money from each salary on your taxes, but the government will have to pay you back in the form of a tax refund, as it usually doesn’t take into account any tax credits or other tax benefits you are eligible for.
Each year, the IRS announces that hundreds of thousands of taxpayers are about to miss the deadline to request tax refunds. The latest announcement in March 2024 stated that $1 billion in outstanding refunds from 2021 are about to be abandoned by taxpayers.
If you haven’t filed it in the past few years, consider filing your tax return immediately.
What happens if I borrow taxes if I don’t submit it?
If you are borrowing a tax bill and have not filed a tax return, the first step is to file your tax return or tax extension as soon as possible, even if you are still unable to pay your invoice. You want to file a tax return because the failure to submit a penalty is much more sudden than the failure to pay the penalty.
Penalty submission failed
If you don’t file your tax return and you’re borrowing money from the IRS, you’ll face the lack of filing a monthly 5% penalty with a 25% cap and interest. Here’s how this is broken down:
– First month: 5% of tax liability
– Months of seconds: 5% of tax liability (60 days later, the minimum impediment to filing a penalty is $485 or 100% of tax liability.
– 3rd month: 5% of tax liability
– April month: 5% of tax obligation
– May: 5% of tax obligation
There are several circumstances, such as natural disasters and military service, and the IRS allows for the failure to submit penalties. However, expect to pay a penalty unless one of these exceptions falls.
State laws vary considerably, so check what local laws are because they failed to submit. (Please check the state’s income and sales tax rates.)
What happens if I pay my taxes late?
Failure to pay taxes by the April 15th deadline will also result in penalties and interest, which are lower than penalties obstacles.
Penalty payment failure
Failure to pay full taxes each month means that the IRS will assess a penalty of 0.5% of the total tax liability. This continues monthly and is maximized at 25% of the total tax amount. (The six-month extension to submit your tax return does not apply to your payments. Payment will not take long. You will only have time to submit your return.)
I’m also interested in unpaid taxes. Interest is determined by the current federal short-term interest rate and an additional 3%. Short-term rates change every three months, so interest rates can go up or down before it takes time to pay your tax invoice in full.
For the first and second quarters of 2025, the interest rate for underpaid is 7% (see this IRS page for interest rate updates).
State laws vary considerably, so check what local laws are because you failed to make payments.
What if I haven’t paid taxes for years?
If you avoid paying taxes for a while, the IRS can try to recover those funds in a variety of ways, such as decorating wages from your pay, placing liens in your home, placing other high value properties, or coming directly to your bank account. The IRS will also withhold future tax refunds until the tax bill is repaid.
There are other potential penalties as well. In some cases, if you borrow more than $62,000 in taxes in 2024 (the dollar amount adjusts inflation each year), the government may refuse to issue a passport. The IRS may also choose to refer to private collection agencies for outstanding tax payments. The IRS can try to get people to jail for unpaid tax liabilities, but that’s very unusual.
Generally, the IRS has 10 years to collect outstanding taxes. However, there are exceptions to this, and there are situations where the 10-year period can be extended.
What to take if you are late for taxes
Tackling unpaid tax liabilities can be stressful and for some people it may seem easy to ignore the situation. However, addressing this issue can save you anxiety and money in the long run. Here are two steps to get started:
– Determine how much you owe: Before you start paying, you need to know how much you owe the IRS. This can be determined by requesting transcripts from the IRS. Even if you haven’t filed taxes in years, you can still see what the IRS has on hand and see how much your agency says you’re owed.
– Tax File: If you have not submitted your taxes yet, do so. Contact your employer and ask for a copy of your tax documents. You should be able to provide these records. Once you submit it, you will see that you have received a refund. If you have a history of good tax compliance, you can alleviate some of your fees under administrative penalty relief, but certain rules apply.
What if I can’t afford to pay taxes?
If you can’t afford to pay taxes, the best thing to do is to contact the IRS and plan your payment. Your agency is more interested in collecting what it can do than punish you, and may work with you to set up a payment plan or installment agreement.
If you are unable to pay your tax liability in full, research the IRS resources to address your tax liability. You can qualify for a compromise offer. This allows you to pay less than you owe. Alternatively, you are eligible to delay the collection of your debt.
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Original issue: April 15th, 2025, 3:57pm EDT
