What Happens If You Don't File Taxes?
Taxes are an unavoidable part of life. Yet, millions fail to file their tax returns every year because they forgot, procrastinated, or assumed they didn’t owe anything. But what happens if you don't file taxes? Is missing the deadline that big of a deal?
The short answer is yes — failing to file your taxes can lead to serious financial and legal consequences, even if you don’t owe money. The risks are too expensive to ignore, from penalties and interest to losing out on refunds.
In this guide, we’ll break down exactly what happens if you don't file your taxes, including the potential fines, legal issues, and how to fix the situation if you’re behind.
You Could Face Severe Penalties and Interest
Assuming nothing will happen if you don’t file is a big mistake. The IRS enforces strict penalties to ensure timely filing. In 2021, U.S. taxpayers failed to pay $688 billion in taxes due to underreporting, underpayment, and non-filing.
Late Filing Penalty. 5% per month on unpaid taxes, up to 25%. If you owe $5,000 and file six months late, your penalty could be $1,250
Max Penalty. It can be increased to 25% of total tax owed if unpaid for too long.
Interest Charges. The IRS charges interest on unpaid taxes starting the day after the deadline. As of 2024, the interest rate was 8% (compounded daily). Even a tiny initial tax debt can grow quickly due to penalties and interest.
So even if you don’t owe a significant amount initially, these penalties and interest can make your debt grow rapidly.
You Might Lose Your Tax Refund
If you're owed a refund but don't file, you could lose that money forever. While most Americans file their taxes on time, some miss deadlines or fail to file altogether. The IRS processes over 160 million tax returns yearly, but many taxpayers fail to file, leading to unclaimed refunds and penalties.
Key facts about unclaimed refunds
- The IRS holds over $1 billion in unclaimed refunds annually.
- In 2023, 1.5 million taxpayers missed out on refunds from previous years.
- The average refund for those who didn’t file in 2020 was $932 per person.
Why does this happen? Many people think they don't need to file if they don’t owe money. The IRS allows only three years to claim a tax refund. If you have not claimed a 2021 refund, you need to do so by April 15, 2025. The refund becomes non-refundable, signifying that the government keeps your money.
The IRS Could File a Substitute Return for You
What happens if i don't file my taxes for several years? The IRS can file a tax return called a Substitute for Return (SFR) on your behalf.
IRS won’t include deductions or credits you may be eligible for.
The income reported is based on third-party records (like your employer or bank), which are not necessarily accurate.
You’ll likely have a higher tax bill than if you had filed yourself.
Once an SFR is processed, the IRS can start collection efforts immediately, meaning you could face wage garnishment or bank levies. What is the best way to prevent the IRS from filing for you? File your tax return before they do it for you.
You Could Be Sent To Collections or Face a Tax Lien
Ignoring unpaid taxes doesn’t make them disappear. The IRS has powerful collection methods to recover unpaid taxes, including:
1. Tax liens
The IRS can place a lien on your home, car, or other property, making it harder to sell and damaging your credit.
2. Wage garnishment
The IRS can take a portion of your paycheck to cover tax debt — without needing a court order.
3. Bank levies
The IRS can freeze and seize money directly from your bank account if you ignore tax debts.
Can You Go to Jail for Not Filing Taxes?
The short answer: In extreme cases, yes. Tax evasion is a federal crime; most non-filers won’t be imprisoned. Below are some of the situations that could lead to criminal charges.
- Willfully failing to file for multiple years;
- Hiding income or filing false returns;
- Owing large amounts and refusing to cooperate with the IRS.
Notable cases include:
- Wesley Snipes (2008). Failed to file taxes for years, resulting in a three-year prison sentence.
- Leona Helmsley (1992). Convicted of tax evasion and served 19 months in prison.
What If You Haven’t Filed for Years?
What happens if you don't file taxes on time? Don’t panic — there are steps you can take to fix it.
Steps to get back on track
Find Your Documents. Gather your W-2s, 1099s, and past tax records.
File Your Past Returns. Start with the most recent year and work your way back.
Set Up a Payment Plan. The IRS offers installment agreements to help you pay over time.
Ask for Penalty Relief. First-time offenders may qualify for reduced or waived penalties.
Get Professional Help. A tax expert can negotiate with the IRS if you're overwhelmed.
In 2022, 94% of tax returns were filed electronically, but some still file on paper, increasing the risk of errors, or forget entirely. Using tax forms like Form 1099 on Loio can help ensure accurate reporting and avoid penalties.
Download form 1099 to file your taxes on time
Final Thoughts
What happens if you don't file your taxes but don't owe anything? It depends — but none of the outcomes are good.
- If you don’t owe, you may lose your refund.
- If you do owe, penalties and interest will add up, and the IRS may take legal action.
- Long-term non-filers risk collections, wage garnishment, or a much higher tax bill.
Ignoring taxes won’t make them disappear — the sooner you act, the better.
What to do now?
- File your taxes — even if you're late.
- Check for unclaimed refunds before it’s too late.
- Set up a payment plan if you owe money.
- Get professional help if you're unsure what to do.
The IRS won’t forget unpaid taxes. What if you don't file taxes? Acting now can help you avoid more significant problems.
Article by
Daria Rubanka
Daria Rubanka is a Content Specialist at Loio, where she creates various types of content, including blog posts and template descriptions. Daria's role is crucial in delivering high-quality, informative content that simplifies legal matters for Loio's users.