Haven’t Filed Taxes in Years? Consequences by Year
If you haven’t filed a tax return for several years, it could lead to some severe consequences and financial losses. You could lose your chance to claim your tax refund or end up owing the IRS thousands in back taxes, penalties, and interest. Fortunately, you can still file past due tax returns and may be able to resolve some of these issues. To help you out, this guide explains what happens when you don't file your taxes, and it breaks it down into a year-by-year timeline.
Table of Contents
- Overview of Basic Filing Requirements
- Unfiled Taxes Last Year: Missed the IRS Tax Return Filing Deadline
- Haven’t Filed Taxes in 2 Years
- Haven’t Filed Taxes in 3 Years
- Haven’t Filed Taxes in 5 Years
- Haven’t Filed Taxes in 10 Years
Overview of Basic IRS filing requirements
You are only required to file a tax return if you meet specific requirements in a given tax year. The most common reason people need to file is when they earn over the standard deduction which is also referred to as the income filing threshold. For the 2022 tax year, these amounts were as follows:
- $12,950 for single filers or married taxpayers filing separate returns.
- $19,400 for head of household filers.
- $25,900 for married taxpayers filing jointly or qualifying widow(er)s.
These amounts have fluctuated over the years. They nearly doubled in 2018 with the passage of the Tax Cuts and Jobs Act (TCJA), and every year, they increase with inflation. If you're dealing with years of unfiled returns, you’ll need to find the income filing threshold for the appropriate tax year to determine if you had a filing requirement that year. For example, use the 2016 income filing threshold to decide whether or not you should have filed a tax return in 2016.
In some cases, you may still need to file a return even when you earned less than the filing threshold amount. Some other reasons you may need (or want) to file include the following:
- You had net self-employment earnings of $400 or more -- This refers to your net self-employment income which is your self-employment income minus expenses. For instance, if you earned $1000 in self-employment income and had $700 in business expenses, your net self-employment income is just $300 so it doesn't trigger a filing requirement.
- You claimed the advanced premium tax credits throughout the year -- This credit offsets the cost of health insurance, but it's based on your adjusted gross income. To ensure you don't owe extra money or deserve a larger credit, you need to file a tax return.
- You qualify to receive a refundable tax credit -- Refundable credits put money in your pocket. They include the earned income tax credit, the child tax credit, and the child care credit. You must file a tax return to get refundable credits.
- You are owed a tax refund because you had taxes withheld from your paycheck or you made estimated tax payments -- If you paid more tax through the year than you owe, you should file a return to claim a refund. This can include estimated payments made directly to the government or taxes withheld from your paycheck.
- You are a dependent with more than $1,100 in unearned income -- The rules for dependents vary if you are over 65, blind, or married.
- You owe special taxes such as the alternative minimum tax or a tax on a qualified retirement plan.
- You have tips or wages that your employer didn't withhold Social Security or Medicare tax from.
You must file your tax return by the deadline set by the IRS each year. This is usually April 15th, but in special cases such as during the COVID pandemic or for areas experiencing natural disasters, the IRS extends the deadline. If the 15th is on a weekend or holiday, the due date moves to the next business day.
Unfiled Taxes Last Year: Missed the IRS Tax Return Filing Deadline
The repercussions for failing to file a tax return depend on whether you have to pay taxes or are due a refund. You also have the option to request a six-month tax-filing extension if you’re going to miss the deadline.
If You Are Due a Refund
Good news—you won’t owe any penalties if you are due a refund on your tax return. You should still file as soon as possible because you can’t receive your refund check unless you file. If you don’t file within three years of the return’s due date, the IRS will keep your refund money forever.
It’s possible that the IRS could think you owe taxes for the year, especially if you are claiming many deductions. The IRS will receive your W-2 or 1099 from your employer(s). However, the IRS won’t know about your itemized deductions or business expense deductions until you file, so they could come after you if they think you should have sent them a check for taxes owed.
You can prevent this issue by filing your return as soon as possible. You can also get an automatic six-month filing extension by submitting Form 4868, as long as you file on or before the due date of the tax filing deadline.
If You Owe IRS Taxes
You could owe both the failure-to-file (FTF) and failure-to-pay (FTP) penalties as soon as your return is a single day late. The FTF penalty is 5% of the tax debt owed per month, and the FTP penalty is 0.5% of the taxes owed. However, there are ways to avoid or minimize these penalties.
You can postpone the assessment of the FTF penalty by requesting a six-month filing extension. The extension will give you until around October 15th to file your return. After that, the IRS will assess the FTF penalty on your tax debt if you still haven’t filed.
Even if you request an extension, you’ll still owe the FTP penalty unless you’ve paid at least 90% of your tax liability for the year. You can estimate this amount and send the IRS some money when you submit your filing extension to minimize the FTP penalty.
The IRS will continue to assess these penalties—along with interest—each month that your return is past due and your tax bill is unpaid. Eventually, the IRS may become more aggressive if you don’t respond to their requests for payment of your tax liability.
Haven’t Filed Tax Returns in 2 Years
If You Are Due a Refund
The clock is ticking on your chance to claim your refund. You should file your tax returns for both tax years to make sure the IRS doesn’t get to keep your tax refund check.
If the IRS thinks you may owe for these tax years, you may have received one or more notices from the IRS by now. Once the IRS assesses tax against you, they can begin seeking collection, which could eventually result in a levy of your bank account or garnishment of your wages.
If You Owe Federal Income Tax
You may be receiving IRS notices about your tax liability in the mail, and penalties and interest will continue to add onto your bill. The IRS may also decide to file a Substitute for Return (SFR) on your behalf.
The SFR usually claims you owe more in taxes than you should. That’s because the IRS is using your W-2 or 1099 to determine your income, but they have no way to calculate your potential deductions or credits. So you could miss out on some significant tax breaks. In fact, the SFR only provides the taxpayer with the standard deduction and one exemption.
The statute of limitations for the IRS to collect taxes—which is generally ten years—also doesn’t begin until you file your return. That means the IRS has more time to seize your assets for unpaid taxes.
Even if you can’t afford to pay off your full tax bill right now, you should file your delinquent returns right away.
Haven’t Filed a Tax Return in 3 Years
If You Are Due a Refund
At three years, this is your last chance to claim your tax refund money! Remember—once it’s been three years from the due date of the tax return, you no longer have the right to claim your tax refund. Not only can’t you claim the money, but the IRS also won’t credit your account for the refund amount or apply it to a future return.
The IRS may have sent you notices informing you that they have not received your tax return. If they think you may owe taxes for one or more tax years, they could assess tax on your account if you don’t respond to these notices. After that, the IRS sends your account to collections, and your assets, income, or credit rating could be at risk.
If You Owe Federal Income Tax
You could face any or all of the following consequences if you have an unpaid tax liability:
- Late payment penalties, failure to file penalties, and interest could substantially increase the amount you owe to the IRS.
- The IRS can file an SFR on your behalf that doesn’t give you the deductions and credits you’re entitled to receive.
- When the IRS files the SFR, they assess tax against you, and the collections process begins. You could receive an intent to levy notice informing you that the IRS may seize assets. An intent to levy notice means they can take funds from your bank account or a portion of your wages.
- A federal tax lien can be filed against your property, making it difficult to sell, refinance, or borrow against your assets.
Your tax problems can start to spiral out of control at this point because the amount you owe is growing and the IRS is proceeding further along in the collections process. You may feel as though your trapped and don’t know how to regain control of your financial situation.
Haven’t Filed Taxes in 5 Years
If You Are Due a Refund
It’s too late to claim your refund for returns due more than three years ago. However, you can still claim your refund for any returns from the past three years. Don’t let the IRS keep any more of your money!
If You Owe Federal Income Tax
There’s a good chance that the IRS has noticed that you have unfiled returns. An SFR may have been filed for several tax years, the tax has been assessed, and your account is in collections. A Notice of Federal Tax Lien may have been filed to notify other credits of the IRS claim against your property.
You probably owe the IRS more money than you can pay back at once. There are payment plan options as well as tax settlement options you should consider. The IRS requires taxpayers who use these programs to file all delinquent tax returns, and you may need assistance from a tax professional with this process.
Haven’t Filed Taxes in 10 Years
If You Are Due a Refund
You can’t seek a refund for the returns that more than three years ago. You can—and should—still file your past three years of tax returns.
If You Owe Taxes
IRS collections have probably been hounding you for several years. You may feel that there’s no way you could even file all your back tax returns, much less pay off ten years' worth of taxes owed, plus penalties and interest.
The IRS has most likely filed a Notice of Federal Tax Lien and attempted to seize one or more of your assets. You could even have your passport revoked if your taxes owed is certified to the State Department as seriously delinquent.
Your tax problems won’t just go away. The IRS only has ten years to collect from taxpayers, but the clock doesn’t start ticking until you file a tax return or the IRS files for you (aka SFR). If you haven’t done one of those things, the IRS has unlimited time to keep trying to collect from you.
Talk to a tax professional about your options. You will probably need help filing a decade or more of late tax returns. You can also discuss your payment options, which could include installment agreements, Offers in Compromise, Hardship, or penalty abatement.
What to Do If You've Never Filed Taxes
If you've never filed a tax return, it can be confusing and scary to think about the process. The important thing to remember is that the IRS is relatively reasonable. The agency wants to work with people and help them file tax returns. As long as you haven't committed tax fraud or evasion, you will be able to file your unfiled returns and make arrangements on your tax debt.
If you're worried that you may have committed fraud, evasion, or another tax crime, you should contact a tax attorney. They can answer your questions and help you identify the best path for dealing with your unfiled returns. Even if you're not worried about tax crimes, you may still want to have a tax professional help you. A tax pro knows how to navigate the IRS's rules and processes. They can help you deal with your unfiled returns and get back into good standing with the IRS.
After you contact a tax pro, the first thing you need to do is gather all of the necessary documents. This includes your W-2 forms from each employer you worked for during the year, as well as any 1099 forms if you were self-employed or had other income sources. If you plan to itemize, you should also gather information about your itemizable expenses. That includes medical bills, homeowner's insurance and interest, state and local taxes, and similar expenses.
If you own a business, you will need all of the income documents and expense receipts for the business. Once you have all of your documentation in order, you can begin filling out your tax return. Make sure to use a tax return from the right year. These forms change from year to year.
If you're not sure where to start, there are many resources available to help you, including the IRS website and online tax preparation software. Note that you may be limited in how far back you can go with tax prep software. A tax professional can walk you through the process step-by-step and help ensure that you don't miss any important details.
Once your return is complete, all that's left to do is file it. You can do this electronically using the IRS e-file system, or you can mail it in. If you're owed a refund and it's less than three years from the original return due date, you can expect to receive it within a few weeks. If you owe tax to the IRS, you'll need to make arrangements to pay. Note that the processing time can be longer than usual when you're dealing with very old returns.
No matter what your situation is, filing your taxes for the first time can be a bit daunting — especially if you've never filed a return. But by gathering your documents, getting help if you need it, and taking care of business, you can get it done with minimal stress.
Self-Employed and Never Filed Taxes
If you're self-employed and never filed, you are going to face more paperwork than the average taxpayer. An employee simply has to enter the details from their W2 wage statement into their tax return, but a self-employed person has to enter detailed information about their business revenue and expenses. This can be daunting, especially if you're self-employed and never filed taxes before.
Here is what you need to do to catch up on your self-employed taxes:
- Figure out which return you need to file — The return you need to file depends on your business structure. If you're a sole proprietor, you should file a Schedule C with your individual tax return or use Schedule F if you're a farmer or fisher. Partnerships and corporations need to file a stand-alone return for the business. Then, you report your share of the business income on your personal income tax return.
- Gather income documents — If you have a point of sale system, you can use those reports to figure out your income. Otherwise, go through your bank and payment accounts and find all your payments from clients.
- List your expenses — Look through your bank and credit card statements and identify all of the expenses that were for your business. Make sure to be thorough if you miss expenses, you'll have a higher than needed tax bill.
Once you've worked through these steps, you're ready to put your self-employment income on your tax return. If you have employees or were supposed to be paying sales tax, you will have additional business tax obligations. A tax pro can help you figure out what you need to do and which forms you need to file.
What Happens If You Don't File Your Taxes for Years?
If you do not file your taxes for years, the IRS can take legal action against you. This can include filing a lien against your property or seizing your assets. In some cases, you may also be subject to criminal charges. If you are facing any of these consequences, it's important to speak with a tax attorney or another tax pro as soon as possible.
How Does the IRS Know If You Haven't Filed a Tax Return?
The IRS uses a number of methods to track down people who haven't filed their tax returns. In particular, the IRS can find out if someone hasn't filed their taxes through third-party reporting. This means that financial institutions, employers, and other entities report information to the IRS about taxpayers.
For example, banks will report interest income earned by taxpayers to the IRS. Employers will report wages paid to employees. If you're self-employed, your clients may send a 1099-NEC to the IRS. Additionally, taxpayers who make estimated tax payments will have those payments reported to the IRS.
If the IRS sees income documents from a taxpayer who hasn't filed a return, the IRS may assume the person should have filed. Then, the agency may send a notice asking for the return to be filed. If the taxpayer doesn't respond, the IRS may take further action, including levying fines or filing liens. In some cases, the IRS may even pursue criminal charges.
Haven't Filed Taxes -- Stimulus Payment
If you did not receive a stimulus payment, you may be able to claim it on your tax return. The federal government sent out three rounds of stimulus payments in 2020 and 2021. If you qualify but didn't receive the 2020 stimulus payments, you can file a 2021 tax return to claim them. Similarly, if you didn't receive but qualified for a stimulus payment in 2021, you can claim it on your 2021 tax return.
To qualify, your adjusted gross income needs to be under a certain level. A tax pro can answer your questions and help you file your returns. The credit is called the Recovery Rebate Credit. If the credit creates a refund, you have three years from the filing deadline to claim it. If the rebate credits reduce your tax bill but don't generate a refund, you have more time as explained above.
How to File Past Due Tax Returns -- Get Help Now
It can take a lot of work to find the information you need to file past-due tax returns for several years. You may want to contact a tax professional for help and to make sure you don’t make any mistakes.
For more information, visit our page on how to file unfiled tax returns.