- Days left

5 Scary Consequences of Failing to File Your Taxes

The last thing you want is an IRS agent knocking on your door.

Tax Audit
Getty Images
By Jennifer Calonia

Some people say they work best under pressure and choose to procrastinate on important tasks like filing taxes. Then there are those who simply forget to file by the April 15 deadline -- or deliberately avoid doing so.

Everyone makes mistakes, especially when under the stress of gathering documentation, crunching numbers and lowering tax liabilities as much as legally possible. However, avoiding your annual tax return obligations can result in costly consequences that extend beyond your bank account.

1. Late penalties. Considering the importance of filing your tax return, it's fair to expect some degree of penalty for failing to file your taxes. If you are expecting an income tax refund, chances are you won't get the same level of scolding from the Internal Revenue Service that others who owe money can expect to receive.

However, if you fall among the people who owe the government money, it's time to shake a leg and get your tax return in as soon as possible.

The penalty for filing late takes effect immediately following the April 15 deadline and will typically equal 5 percent of the unpaid taxes you owe for every month you delay filing your return, up to a 25 percent cap.

A less hefty penalty of 0.5 to 1 percent of your unpaid taxes per month applies to taxpayers who file by the deadline, but owe taxes and don't pay up. Even if you can't afford your taxes now, it's best to at the very least file your tax return on time.

Those who both file late and fail to pay for the taxes they owe are charged a maximum penalty of 5 percent of their unpaid taxes for every month the bill is late.

2. Delayed reimbursement. With spring vacations around the corner, you'll likely want to keep all the money you can.
Those who wait beyond the eleventh hour to file taxes and claim their refunds may not only get dinged with a late-filing penalty, but holding up refunds does an equal disservice.

Ever hear people preach about not giving Uncle Sam an "interest-free loan?" By failing to file your taxes, you're only prolonging this financial injustice against your wallet. Essentially, you're giving up the ability to save or invest that money at a higher return.

3. Forfeiture of tax refund. Just because you don't owe the IRS money doesn't mean you can keep your refund on hold indefinitely. When you're owed a reimbursement from the government, its in no rush to pay you back. In fact, Uncle Sam will give you three long years after the tax year for which you filed to claim your back tax refund.

After this generous window, however, the IRS will consider your unclaimed refund a generous "donation," and you'll be out of your rightful cash.

4. Substitute for return. Individuals who fail to submit their tax return by the deadline (or extension deadline, if applicable) aren't in the clear yet. In fact, the IRS will attempt to contact delinquent tax filers repeatedly and remind them to file their tax returns.

If their efforts fail, the IRS reserves the right to file a substitute for return on behalf of the filer. The form calculates the amount of taxes owed based on taxable income, plus any applicable penalties. Payments made to self-employed individuals are also used in SRF computations, as are dividends paid on investments.

But a substitute for return isn't necessarily conducted in filers' best interest. This course of action does not take into account tax credits and deductions that may reduce your taxable income, which means you may be overpaying on your taxes in the end.

If you receive a bill from the IRS indicating that it performed an SRF, you can still file your tax return to claim your deductions and expenses. The IRS usually will make the appropriate corrections.

5. Arrest. The consequences for ignoring an IRS bill can be a lot more dire than warning letters. After sending multiple correspondences regarding an unpaid tax bill, the IRS will send a representative to your residence or business to collect payment -- typically if you owe $25,000 or more.

Continuing to avoid this responsibility can result in automatic wage garnishments, asset seizures like your car and may even lead to arrest and jail time for tax evasion.

At the end of the day, you're better off filing your tax return late than never filing it -- or paying your taxes -- at all.

Jennifer Calonia writes for GoBankingRates.com, a source for online banking, the best CD rates, savings account rates, personal finance news and more.

More from U.S. News

Increase your money and finance knowledge from home

Introduction to Preferred Shares

Learn the difference between preferred and common shares.

View Course »

How to Avoid Financial Scams

Avoid getting duped by financial scams.

View Course »

TurboTax Articles

A Tax Guide for Solopreneurs: Self-Employed Tax Tips

Flying solo can be the ultimate business adventure. When you run your own business and you're the only employee, you truly hold all the cards and earn the freedom to achieve your ideal work-life balance. Working for yourself also brings tax advantages not available to those who work for others. It's important to understand the tax rules that apply to the self-employed to profit the most from these.

Can I Claim Medical Expenses on My Taxes?

Medical expenses can take a bite out of your budget, especially if you have unforeseen emergencies that are not fully covered by your insurance. The Internal Revenue Service allows taxpayers some relief, making some of these expenses partly tax-deductible. To take advantage of this tax deduction, you need to know what counts as a medical expense and how to claim the deduction.

What Is a 1099-G Tax Form?

The most common use of the 1099-G is to report unemployment compensation as well as any state or local income tax refunds you received that year.

Add a Comment

*0 / 3000 Character Maximum


Filter by:

#2 referenced giving Uncle Sam an Interestt Free Loan.....and suggested that you lose a lot(?) by not putting it in a Savings Account.....(it does also suggest the more lucrative possibility of investing) but....Savings? Best reference I've heard lately are about CD's.....most people believe this means Cert.s of Deposit but it more accurately means Certificates of DEPRECIATION!!! Think about it. IF there was a CD that paid 3%.....(there isn't) and the inflation rate is 5%, you're effectively LOSING 2% of your money power every year....but then, you are also TAXED on the pittance of Interesst you do earn so.....

April 07 2014 at 12:50 AM Report abuse rate up rate down Reply

Have they enough so called agents after dropping thousands, and can this disreputable agency even cope with the idiotic aca and its multi compound regs and the enormous number of people who still can't get in,

And finally, can any numbers from Obama be trusted? I think the number contains totals of all kinds of different and incompatible sources.

April 05 2014 at 1:36 PM Report abuse rate up rate down Reply

Screw the IRS, people should not file, these fat ass slackers are not worthy, of our hard earned money.

April 05 2014 at 6:15 AM Report abuse +2 rate up rate down Reply


April 04 2014 at 11:59 PM Report abuse rate up rate down Reply
1 reply to PATRICIA LACKEY7's comment

Best you contact some blockbuster corp headquarters.

April 05 2014 at 1:38 PM Report abuse rate up rate down Reply

I'll bet there are more than a few people who never file an income tax return and never have anything happen to them. How can they catch everyone?

The IRS is not going to let it out that they haven't caught every non-filer. Why would they? It's in their interest to make everyone believe that as soon as someone doesn't file a return, they're as good as dead. If the actual number of non-filers was ever revealed, it would just encourage more people not to file.

By the way, it's also in the IRS' best interest to have most people get an income tax "refund."

April 04 2014 at 9:24 PM Report abuse +2 rate up rate down Reply
1 reply to steves915's comment

Filing a tax return is the law. But given IRS limited resources, going after nonfilers for the sake of being nonfilers is usually a waste of resources. So people with less than $6,000 annual income, unemployed not receiving unemployment insurance, recently deceased taxpayers with history of having no taxable income, etc., are likely to escape IRS attention.

April 04 2014 at 11:47 PM Report abuse +1 rate up rate down Reply

And if you the government owes you a refund, you have three years to file your return. They only come after you if you owe them but they will sure as heck try to screw you out of your refund if you're filing late. They did that to us and we lost $1500 in refunds because we can't afford a lawyer. Their websites states that as long as it's postmarked by the 15th, it's not late. Because of circumstances, we were delayed and mailed on the 15th (the last possible day for one of our returns). Know what they did? Said it was late and told us to "prove it" when brought of their own policy. ********.

April 04 2014 at 8:33 PM Report abuse +3 rate up rate down Reply
1 reply to valgaavmiko's comment

You need to send return with delivery confirmation if you expect to prove you met the deadline. You might imagine the Noah flood of tax returns delivered to IRS on April 15-16 and getting backed up in IRS system. And many post offices no longer date stamp first class mail on the envelope and IRS may not retain the envelope to know if you filed on the 15th.

April 04 2014 at 11:52 PM Report abuse rate up rate down Reply
1 reply to Richard's comment

In past if I was filing on the 1 of April or later I would send my return with Registered Mail as to avoid any problems.

April 05 2014 at 4:43 AM Report abuse rate up rate down
Hola Renecito!


April 04 2014 at 8:13 PM Report abuse rate up rate down Reply

Actually Douglas, it is not illegal to attempt suicide. It used to be a crime about 25 years ago. But the law has changed since then and it is considered a mental sickness. The goverment should go to a flat tax. I am sick and tired of figuring out this crap every year.

April 04 2014 at 7:58 PM Report abuse +1 rate up rate down Reply

I never had to pay the IRS in all the yrs. i worked. Now i am on a pension,make 1/2 the money i did and because they didn't take out enough federal tax i have to pay. So i filled out the proper form and now give Uncle Sam and extra $300 a month so i don't have to pay next yr....unbelievable

April 04 2014 at 7:57 PM Report abuse +1 rate up rate down Reply

I have no friends to speak of, I am responsible to no one or for. I am not going to file this year, send me to jail, fine me the moon, give it your best shot. I served my country 20 years and if they want that pension, they're welcome to it, as well as my social security. I'll go beg on the street, beggars pay no taxes yet they drive big new cars, have new homes and lots of spending money just by begging,I don't have much self-esteem anyway and just want to die, but it;s illegal to take my ony life. Oh, and by the way, I didn't sign up for obamacare either

April 04 2014 at 7:21 PM Report abuse +2 rate up rate down Reply