If you owe tax and your return was not filed by the due date, including extensions, you may be
subject to the failure to file penalty, unless you have reasonable cause for not filing. If you did not
pay your tax in full by the due date for the return, not including extensions of time to file, you also
may be subject to the failure to pay penalty, unless you have reasonable cause for your failure to
pay. Additionally, interest is charged on taxes not paid by the due date; even if you have an
extension of time to file. Interest is also charged on penalties.
The IRS continues to identify people who have a filing requirement but have failed to file a return.
By law the IRS may file a substitute return for you if you do not voluntarily file. A series of letters is
first sent explaining the possible action IRS may take as part of the Substitute for Return Program.
If you do not file a return or otherwise indicate disagreement such as by requesting to exercise
your appeal rights, the IRS will file a basic return for you. An IRS-prepared return will not include
any of your additional exemptions or expenses. The IRS will compute the tax liability and send you
a bill for the tax that will also include interest and penalties.
If a substitute return has already been filed for you by the IRS, you should still file your own return
to claim any additional items. The IRS will generally adjust your account to reflect the corrected
figures.
What are the consequences of not filing a tax return?
Here are some things to consider:
• Failure to file penalty. If you owe taxes, a delay in filing may result in a "failure to file" penalty,
also known as the “late filing” penalty, and interest charges. The longer you delay, the larger
these charges grow. It may result in penalty and interest charges that could increase your tax
bill by 25 percent or more.
• Losing your refund. There is no penalty for failure to file if you are due a refund. However,
you cannot obtain a refund without filing a tax return. If you wait too long to file, you may risk
losing the refund altogether. In cases where a return is not filed, the law provides most
taxpayers with a three-year window of opportunity for claiming a refund.
• EITC. Individuals who are entitled to the Earned Income Tax Credit must file their return to
claim the credit even if they are not otherwise required to file. The return must be filed within
three years of the due date in order to receive the credit.
• Statutes of limitation. After the expiration of the refund statute, not only does the law prevent
the issuance of a refund check, it also prevents the application of any credits, including
overpayments of estimated or withholding taxes, to other tax years that are underpaid. On the
other hand, the statute of limitations for IRS to assess and collect any outstanding balances
does not start until a return has been filed. In other words, there is no statute of limitations for
assessing and collecting the tax if no return has been filed.
What should you do?