The consequences for not filing your tax returns can be severe and place the delinquent taxpayer in even more trouble.

Failure to file your taxes is considered a crime.

Refusal to file your taxes can be considered a type of tax evasion.

Nevertheless, because millions of taxpayers fail to file every year, the IRS does not prosecute each delinquent taxpayer. Instead, a tax evasion charge will only come much later after a taxpayer has actively avoided the IRS’s attempts to collect.

While the IRS may not take immediate action against delinquent taxpayers, it is best not to test your luck.

In the long-term, failure to file your taxes can result in limited loan access, seizure of assets, fines up to $25,000, and/or even jail time.

One of the most common occurrences, when taxes are unfiled or filed late, is, of course, a delayed tax refund. Even if you don’t receive any notices from the IRS initially, you will start to accrue penalties if you are late to file your taxes.

Starting on April 16th, a late penalty of 5% is taxed on to your owed amount for every month you fail to file. The IRS will begin sending their CP515, CP516, CP518, and CP515B letters in sequence until you file.

Tax Refund Forfeiture

Yes, it is possible to still receive a refund on your back taxes. However, you only have three years from the return’s due date to claim it. If you wait longer than this, under the Statute of Limitations, you forfeit your right to claim and the U.S. Treasury will retain ownership of it.

In 2019, more than $1.4 billion in taxpayer refunds were left unclaimed.

Late Penalties

As stated above, if you do not file your taxes and fail to file for an extension by April 15th, late penalties will start immediately the following day.

For every month you fail to pay, your taxes accrue a 5% penalty, capping at 25%.

If you have a tax bill after you file your taxes and are unable to pay by April 15th, late penalties will still be applied to your balance, but they won’t be as severe.

A variable rate of 0.5% to 1% of your unpaid taxes will be charged on your principal amount for every month that goes unpaid.

If you need more time to file your taxes, consider filing for an extension. This will extend your tax due date to October 15th; however, you will need to give yourself an ample amount of time to file the paperwork and get approval for the extension.

Bottom line: File your taxes as early as possible. Filing months before the deadline can give you time to pay off your taxes, or more time to file for an extension.