- Days left

What Happens When You Don't File Your Taxes

Forgot to pay taxes
By Mandi Woodruff

What actually happens to Americans who either forget or flat out refuse to file their taxes?

The simple answer is that it's nothing good. In fact, after doing some digging, we're pretty sure you'd be better off filling out your tax forms in crayon than sitting on your hands and letting the IRS have at you.

"There's simply no hiding from the IRS," says Odysseas Papadimitriou, CEO of Cardhub.com. "Level with yourself as well as the IRS about your ability to pay, pick a payment option that makes the most sense, and make sure to honor the terms of your agreement."

Just in case you were curious, here's what happens if you don't:

You haven't filed your taxes at all. Skip filing all together and you're already looking at paying a 5 percent monthly fee on however much you owe. It maxes out at 25 percent. If you wait more than 60 days to file, then you'll get hit with a $135 fine, or 100 percent of the taxes you owe (whichever is less).

You've gotten a filing extension but haven't paid your taxes. Even if you've gotten an extension to file your taxes by Oct. 15, that doesn't mean you get six extra months to pay. The IRS levies a 0.5 percent fee on your unpaid taxes every month until the balance is paid, PLUS at least 3 percent in interest that is compounded daily. Ouch.

If you have filed an extension to file AND have paid at least 90 percent of your tax bill by April 15, however, this penalty doesn't apply. But it doubles if the IRS issues a letter demanding immediate payment.

You haven't filed your taxes OR paid your tax bill. In this case, you have two strikes against you. The IRS will calculate penalties for both and then subtract the late payment fee from your late filing fee. The $135 late charge for filing after 60 days still applies.

You've filed your taxes by April 15 but still haven't paid. First of all, hats off to you for at least filing. The IRS looks kindly on taxpayers who file, even if they can't pay straightaway. On-time filers get a discounted penalty rate of 0.25 percent per month so long as they have a payment agreement in place.

You've filed your taxes and you want to pay your bill in increments. The IRS does have monthly payment plans for taxpayers who can't fork over funds for their entire bill straightaway. But there are some caveats to consider: An application fee that ranges from $52 to $105, and the late payment and interest charges of 0.05 percent and 3 percent, respectively. You can set up a payment plan online here.

Another option would be to consider paying your bill on a 0 percent interest credit card -- but only if you plan on paying your bill before the promotional period ends. One-time credit/debt card fees apply.

Your only way out: If you want a free pass on paying or filing your taxes on time, you're going to have to come up with a better excuse than a sick day. Per the IRS, you'll need proof of a "reasonable cause" rather than forgetfulness. And don't kid yourself into thinking you're off the hook if a month goes by and no IRS lackeys come calling. It can take anywhere from six months to a year for the agency to catch up to late payers.

And if you've decided to ignore Uncle Sam because you think you won't be able to afford your payment, you're better off at least knowing what you're up against. There are plenty of tax estimate tools available which will give you an idea of what you'll owe or be owed.

See IRS.gov for more details on late fees.

More from Business Insider

Increase your money and finance knowledge from home

How to Buy a Car

How to get the best deal and buy a car with confidence.

View Course »

Managing your Portfolio

Keeping your portfolio and financial life fit!

View Course »

TurboTax Articles

Cities with the Lowest Tax Rates

The total amount of tax you pay reaches far beyond what you owe the federal government. Depending on where you live, most likely you're required to pay additional taxes, including property and sales tax. The disparity between the amount of tax you pay in a low-tax city and that in a high-tax city can be dramatic. Living in any of these 10 cities could save you a bundle, although the exact amount may fluctuate based on your income and lifestyle choices.

Cities with the Highest Tax Rates

Much ado is made in the press about federal tax brackets, but cities can carry a tax bite of their own. Even if you live in a state that has no income tax, your city may levy a variety of taxes that could eat away the entire benefit of living in an income tax-free state, including property taxes, sales taxes and auto taxes. Consider all the costs before you move to one of these cities, and understand that rates may change based on your family's income level.

Great Ways to Get Charitable Tax Deductions

Generally, when you give money to a charity, you can use the amount of that donation as a deduction on your tax return. However, not all charities qualify as tax-deductible organizations. While there are many types of charities, they must all meet certain criteria to be classified by the IRS as tax-deductible organizations. There are legitimate tax-deductible organizations in many popular categories, such as those listed below.

A Freelancer's Guide to Taxes

Freelancing certainly has its benefits, but it can result in a few complications come tax time. The Internal Revenue Service considers freelancers to be self-employed, so if you earn income as a freelancer you must file your taxes as a business owner. While you can take additional deductions if you are self-employed, you'll also face additional taxes in the form of the self-employment tax. Here are things to consider as a freelancer when filing your taxes.

Tax Deductions for Voluntary Interest Payments on Student Loans

Most taxpayers who pay interest on student loans can take a tax deduction for the expense ? and you can do this regardless of whether you itemize tax deductions on your return. The rules for claiming the deduction are the same whether the interest payments were required or voluntary.

Add a Comment

*0 / 3000 Character Maximum


Filter by:
Cody Silver

I know so many people that don't file and nothing seems to happen, two of them haven't filed for 12 years!! What's up with that?

March 31 2015 at 8:34 PM Report abuse rate up rate down Reply

Answer: Free tickets to Hopey Changey Town Resort.

September 24 2014 at 11:51 PM Report abuse rate up rate down Reply

Screw you author, if I didn't make profits I don't have to file.. wages are not profits so I don't need to file ****

August 12 2014 at 9:23 PM Report abuse rate up rate down Reply

Let's ask billionare John Kerry what happens when you avoid paying your taxes!!!!!

April 19 2013 at 4:32 PM Report abuse +2 rate up rate down Reply
1 reply to bambamsgolfcart's comment


April 19 2013 at 4:32 PM Report abuse +2 rate up rate down Reply

What happens when you don't file your taxes? That qualifies you for a job in the Obama administration.

April 19 2013 at 4:29 PM Report abuse +4 rate up rate down Reply

You should always file a tax return whether or not you have a tax liability.

April 19 2013 at 12:16 PM Report abuse rate up rate down Reply


April 19 2013 at 6:16 AM Report abuse +1 rate up rate down Reply

How about a thank-you note from the IRS for those of us who paid a ton of money in taxes and had to pay more.....and did it before the deadline !!!!!!!!!!

April 19 2013 at 12:07 AM Report abuse +1 rate up rate down Reply

You can get away without paying taxes if you're the head of the IRS. right Tim?

April 18 2013 at 5:35 PM Report abuse +1 rate up rate down Reply

who wrote this story ? some one working for the irs, this story designed to instill fear in people, well screw these communists, that all the irs is, an illegal extortion ring

April 18 2013 at 7:37 AM Report abuse rate up rate down Reply