Not filing your tax returns can be very serious business. You can be given large financial penalties and even imprisoned depending on the severity of not filing.

What Can Happen if You Don’t File your Tax Returns?

Individual taxpayers who do not file tax returns or pay estimated taxes may be charged with a misdemeanor, be subject to a jail term of not more than 1 year and subject to a $25,000 fine ($100,000 in the case of a corporation). There are no similar obligations where no taxes are owed.

If you “willfully” fail to file your tax returns and pay your tax debt, you may be charged with a felony and subject to a jail term of up to 5 years in addition to other penalties that may apply.

You can also be prosecuted for tax fraud for failure to file tax returns when taxes are due. You can avoid prosecution for tax fraud where you voluntarily file any late, delinquent or unfiled tax returns.

 

How Long Can the IRS Assess Taxes?

 

The general rule is that the IRS must assess a tax within 3 years after a tax return is filed. If you don’t file your tax returns, the 3 year period to assess taxes never begins and gives the IRS the right to both examine that tax year or assess taxes that may be owed anytime within your lifetime.

What are the Tax Penalties for Not Filing a Tax Return?

You can be assessed tax penalties up to 25% of the taxes that are due at a minimum. When penalties are assessed, you will also be subject to interest charges on the unpaid balance. This is the most common penalty assessed when you fail to file your tax returns. Other penalties may also apply.

There is no penalty for failure to file a tax return if a refund is due. However, if you are owed a refund, you must file your tax return within 3 years of the due date to receive a refund. Similarly, if you file a return and later realize you made a mistake on your tax return, the deadline for claiming any refund due is three years after the return was filed, or two years after the tax was paid, whichever expires later.