I Never Filed My Taxes: What Happens Now?

It's a bad idea to skip paying your fair share.

The two little words many people dread: tax return. It's perfectly normal to feel this way -- filing your taxes can be a time-consuming and sometimes nerve-wracking activity. If you're a salaried employee who receives a W-2 from your employer and has minimal or nonexistent income beyond that, it's a lot simpler for you to file than it is for those of us who freelance and have multiple employers and financial plates to spin. Depending on your employment situation, you may be required to file and pay taxes just once per year, by mid-April, or if you own your own business or have robust income from freelancing, you're lucky enough (ha!) to pay quarterly estimated taxes on top of filing an annual return.

If you're not sure whether you need to file a tax return, the Internal Revenue Service has a handy tool to help you determine that. If you're required to pay taxes due to your income and other circumstances and you haven't filed your return for tax year 2021, what will happen to you?

Read more: Best Tax Apps & Software

What if you're filing late?

This is a good time to mention that if you haven't filed yet, but you did ask for an extension, you have until Oct. 17, 2022 to file your 2021 tax return. Some taxpayers (including some military service members and people impacted by natural disasters) don't have to file for an extension, and are granted one automatically; if this is your situation, you should consult IRS.gov for more details. And it's important to note that even if you've gotten an extension, it doesn't exempt you from paying whatever taxes you owe by the deadline in April, which was April 18 this year.

What if you owe taxes?

Well, April 18 has come and gone, and you know you owe taxes for 2021, but you didn't file your return. Now what? Simply put, the IRS may charge you even more money in the form of a failure-to-file and a failure-to-pay penalty. It will also charge you interest on the taxes you already owe. And interest will be charged on the penalty, too. If you have reasonable cause not to have filed or paid your taxes, you can fill out Form 1127 and request an extension for your payment. If this isn't the case, you can expect to hear from the IRS in the form of a mailed summons, compelling you to pay your taxes. And guess what! The IRS may even investigate your previous tax history if this isn't the first time you've pulled such a stunt.

The penalties you'll be assessed (for both failure to file and failure to pay) will equal 5% of what you already owe per month or partial month that your taxes are late. The total amount won't exceed 25% of what you owe in total. After five months, the failure-to-file penalty will max out, but you can keep accruing that failure-to-pay penalty (again, up to the 25% figure). And you'll get those interest charges on these penalties, too, until you pay off the balance owed. In short, it can be expensive to skip filing and/or paying your taxes. If for some reason you can't pay, the IRS is willing to work with you. Get in touch and see what the next steps will be.

What if you are owed a refund?

As much of a pain as filing your taxes can be, the one possible bright spot during tax time is the possibility of getting a tax refund. If you've overpaid your taxes for the year, or you make so little that you aren't eligible to pay taxes, when you file your return, the state and federal government will get your money back to you. Under these circumstances, there's really no question that you should file your taxes! Note that the IRS will not track you down to give you that money back; you must file a tax return to claim it.

There's really no situation in which it's a good idea to skip filing your taxes. You could end up owing more money on top of the taxes you already owe, and could be subject to getting audited or even prosecuted (tax evasion is a federal crime that comes with prison time if you're convicted) if you don't file or pay your taxes. Or in the best case scenario, you're going to miss out on a chunk of money owed to you. In these trying times of high inflation, we all need to keep as much money in our bank accounts as we can.