What Happens if I Don't File My Taxes?

The short answer: It depends on how much you earn and how much you owe.

Maurie Backman
Maurie Backman
Mar 11, 2019 at 8:18AM
Investment Planning

Filing a tax return can be a major drag, so much so that you might tempted to skip the process altogether and deal with the consequences after the fact. But what actually happens if you don't file a tax return? Will the IRS come knocking at your door? Or will you manage to escape unscathed?

Not everyone has to file taxes

Some earners are automatically exempt from filing tax returns. If your income falls below the following thresholds, you technically don't need to file a 2018 return at all:

Tax Filing Status

Age (As of Dec. 31, 2018)

Income at Which You Must File a Tax Return

Single

Under 65

$12,000

Single

65 or older

$13,600

Married filing jointly

Both spouses under 65

$24,000

Married filing jointly

One spouse under 65

$25,300

Married filing jointly

Both spouses 65 or older

$26,600

Married filing separately

Any age

$5

Head of household

Under 65

$18,000

Head of household

65 or older

$19,600

Qualifying widow or widower with dependent child

Under 65

$24,000

Qualifying widow or widower with dependent child

65 or older

$25,300

That said, just because you're not required to file a tax return doesn't mean that you shouldn't. There are several lucrative tax credits out there that could make you just a bit richer if you take the time to pull a return together.

Take the Earned Income Tax Credit, or EITC, for example. It's designed for low-income households and could be worth up to $6,431, depending on the number of children you have in your household. Because the EITC is refundable, the IRS will send you the difference if it lowers your tax liability below $0, so it pays to file a return and see if you're eligible for money back.

The word taxes spelled out in tiles in front of a calculator

IMAGE SOURCE: GETTY IMAGES.

Keep in mind that if you're a low earner, you have the option to file your taxes electronically for free, and if your tax situation isn't complicated (say, you only have a W-2 from your job and are taking the standard deduction), you might complete your return in no time. Another thing you should know is that you have a three-year grace period to file taxes and collect whatever refund you're entitled to. For example, 2018 tax returns are due on April 15, 2019, which means that you technically have until April 2022 to file yours. Similarly, if you failed to file a tax return over the past couple of years, it's probably not too late to submit one now and get any money you're due back.

When you don't file taxes but owe the IRS money

Not filing a tax return when you owe the IRS money for its associated tax year is bad news. Go that route, and you'll be hit with a failure-to-file penalty equal to 5% per month or partial month your taxes remain unpaid, up to a maximum of 25% of your unpaid tax bill. Furthermore, if you neglect to file for more than 60 days after the tax filing deadline (in this year's case, April 15), you'll face a minimum penalty of $135 or 100% of your unpaid tax bill -- whichever amount is smaller.

Keep in mind that there's also a late payment penalty that applies when you owe the IRS money but don't submit that payment by the associated filing deadline. You might incur this penalty even if you do file your taxes in time for the deadline, but don't pay your tax bill in full or at all by that time.

Another thing you should know is that in the long run, serious consequences might ensue if you owe the IRS money but don't file a return or pay your taxes. For one thing, the IRS might garnish your wages until it gets its cash. Or, it might seize certain assets of yours. None of that is what you want. Therefore, if you owe taxes but can't pay, file your return anyway and sign up for an IRS payment plan. The agency will usually work with you in some shape or form if you come clean about your situation and don't try to pull a fast one.

Though filing taxes can be a headache, in most cases, it pays to get the job done. If you owe the IRS money, you'll avoid costly penalties by getting your return in on time. And if you're due a refund, you won't risk forgoing money that otherwise could've been yours.


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