What Is the Penalty for Failure to File Taxes?

There are penalties for failing to file a tax return or pay a tax bill. Here's how they work and how to avoid them.
Tina OremMar 17, 2021
What's the Penalty for Failure to File Taxes?

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If you haven’t filed a tax return in several years, you probably need to file your past returns as soon as possible. There’s a penalty for not filing taxes.

What is the penalty for not filing taxes?

The penalty for not filing taxes (also known as the failure to file penalty, or the late filing penalty) usually is 5% of the tax you owe for each month or part of a month your return is late. The maximum failure to file penalty is 25%. If your return is more than 60 days late, the minimum penalty for not filing taxes is $435 or the tax you owe, whichever is smaller.

Good news: You might not owe the penalty if you have a reasonable explanation for filing late. You can attach a statement to your return explaining your reason for filing late.

The late filing penalty is not the same as the late payment penalty. The late filing penalty punishes people who don’t turn in their Form 1040 and other important tax documents on time.

The late payment penalty punishes people who pay their taxes late. It is 0.5% of your unpaid taxes for each month your outstanding taxes are unpaid. Add interest on top of that.

The failure to file penalty usually doesn’t apply if you’re due a refund

If the IRS owes you money and you haven’t filed a tax return to claim it, get cracking! You typically have just three years to claim a tax refund. There is usually no penalty for failure to file if your tax return results in a refund.

How to avoid a failure to file penalty

If you’re going to miss the tax-filing deadline, help yourself avoid the penalty for not filing taxes by getting an extension to file your tax return. A tax extension can get you an extra six months to get your tax return to the IRS.

Remember, however, that a tax extension only gets you more time to file your tax return. It does not get you more time to pay your taxes. (Some people, such as natural disaster victims, certain members of the military or Americans living overseas, may automatically get more time to file.)

If you miss the tax extension deadline, though, that failure to file penalty could come back to haunt you.

If you’re trying to see how long can you go without filing a tax return

It’s a risky proposition. While the government usually has just six years to charge you with criminal tax evasion, it has forever to collect the taxes you owe and assess penalties. In addition to the failure to file penalty, these things could happen to you when the IRS catches up to you:

  • Failure-to-pay penalty: If you don’t pay the taxes you owe by the deadline, the IRS can penalize you 0.5% of the unpaid balance every month, up to a total of 25%.

  • Interest: On top of the failure-to-pay penalty, interest accrues on your unpaid taxes.

  • A substitute return: If you fail to file but the IRS has some information needed to calculate your taxes, such as your W-2 form, you may be notified by mail that it has filed a return on your behalf. It won’t consider the tax credits, deductions or other tax breaks you may have taken if you’d done your taxes.

  • Lost refunds: You may be missing out on money you’re owed. In most cases, the IRS gives you a three-year window to file previous years’ returns. Once this window closes, you forfeit your tax refund.

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