The tax-filing deadline is typically April 15 each year. If you can’t make that deadline, it’s generally easy to get a six-month extension for filing your return, though your tax payment is still due on April 15.
But what happens if you don’t manage to file your return by either of those deadlines? The consequences are very different if you’re expecting a tax refund versus owing the IRS money.
You haven’t filed, and you expect a refund
Most Americans get a tax refund after filing their tax return. This happens because you’ve paid more in taxes over the course of the year than you owe. Most employers withhold money from each paycheck, which goes toward your taxes, but that withholding typically doesn’t account for tax credits and other tax perks you may be eligible for, so the government has to pay you back in the form of a tax refund.
If you don’t owe any taxes or if you’re owed a refund, there’s no penalty for not filing your tax return. But you won’t receive your refund until you do file. There will be no penalty for filing late — just get your paperwork to the IRS so they can process your taxes and issue the refund. You have up to three years after the due date of your return to claim your tax refund.
Every year, the IRS announces that hundreds of thousands of taxpayers are about to miss the deadline to claim their tax refund; the most recent announcement, in March 2024, said that $1 billion in unpaid refunds was about to be relinquished by taxpayers who missed the three-year deadline for claiming their 2020 refund. It’s not too late to claim refunds for the 2021, 2022 and 2023 tax years.
You haven’t filed, and you owe taxes
If you owe a tax bill and you haven’t filed your tax return, then the first step is to file your tax return as soon as you can, even if you can’t pay your bill just yet. The reason it’s important to get your tax return filed is because the failure to file penalty is much steeper than the failure to pay penalty.
Failure to file penalty
If you don’t file a tax return and you owe money to the IRS, you’ll face a failure to file penalty of 5 percent each month on any unpaid taxes, capped at 25 percent, plus interest. Here’s how it breaks down:
- First month: 5 percent of tax liability
- Second month: 5 percent of tax liability (after 60 days of being late, the minimum failure to file penalty is $485 or 100 percent of your tax liability, whichever is less)
- Third month: 5 percent of tax liability
- Fourth month: 5 percent of tax liability
- Fifth month: 5 percent of tax liability
There are some situations, including natural disasters and military service, for which the IRS will forgive failure to file penalties. But unless you fall under one of those exceptions, expect to pay the penalty.
State laws vary considerably, so check what your local laws are for failure to file.
What happens if you pay taxes late?
Failing to pay your tax bill by the April 15 deadline also comes with penalties and interest, though the penalty is lower than the failure to file penalty.
Failure to pay penalty
Each month that you fail to pay your taxes in full will result in the IRS assessing a penalty of 0.5 percent of your total tax liability. This will continue each month, maxing out at 25 percent of your total tax bill. (The six-month extension of time to file your tax return doesn’t apply to your payment; it only applies to your tax return.)
There is also interest owed on any outstanding taxes. The interest will be determined by the current federal short-term interest rate plus an additional 3 percent. The short-term rate changes every three months, so your interest rate may go up or down depending on how long it takes to pay your tax bill in full.
State laws vary considerably, so check what your local laws are for failure to pay.
What happens if you haven’t paid taxes in years?
If you haven’t paid your taxes in years, the IRS may seek to recover those funds from you in a number of ways, including garnishing wages from your paycheck, placing a lien on your home or other high-value property or coming directly for your bank account. The IRS will also withhold future tax refunds until your tax bill has been paid down.
There are other potential penalties, as well. In some cases, if you owe more than $62,000 in taxes in 2024 (the dollar amount adjusts for inflation each year), the government may refuse to issue you a passport. The IRS may also choose to refer your outstanding tax payment to a private collections agency, which will likely be more aggressive in attempting to recover the funds. The IRS can seek to have people jailed for unpaid tax debt, but that’s highly unusual.
Generally, the IRS has 10 years to collect on unpaid taxes. However, there are exceptions to this, and situations where that 10-year period can get extended.
Steps to take if you’re behind on taxes
Dealing with outstanding tax debt can be stressful, and for some people it may feel easier to ignore the situation. But addressing the issue can save you anxiety and money in the long run. Here are two steps to get started:
- Determine how much you owe: Before you can start paying, you need to know just how much you owe the IRS. You can determine this by requesting your transcripts from the IRS. Even if you haven’t filed taxes in years, you will be able to see the information the IRS has on hand and see how much the agency says you owe.
- File your taxes: If you haven’t filed your taxes yet, do that. Contact your employers and ask for a copy of your tax documents. They should be able to provide these records. Upon filing, you may find that you are owed a refund.
What to do if you can’t afford to pay taxes
If you can’t afford to pay your taxes, your best bet is to contact the IRS to work out a payment plan. The agency is more interested in collecting what it can than penalizing you, and is likely to work with you to set up a payment plan or an installment agreement.
Payment plans do carry interest and penalties, and failing to make a payment may result in the IRS requesting the full amount and ending the agreement.
If you can’t pay your tax debt in full, research the IRS’s resources for dealing with tax debt. You may qualify for an offer in compromise, which lets you pay less than you owe, or you might qualify to delay collection of your debt.
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