Most workers in the United States are required to file income tax returns with the Internal Revenue Service to pay additional taxes owed or receive a tax refund. Most single taxpayers are required to file an income tax return if their annual gross income is at least $9,350. If you were required to file an income tax return, but failed to do so, you may be subject to a variety of penalties.
Late Tax Filing Penalty
Taxpayers who fail to file their tax returns by the due date -- normally April 15 of the year following a given tax year -- are subject to a late filing penalty. According to the IRS, a failure-to-file penalty of 5 percent per month up to a maximum of 25 percent may be applied to the outstanding tax not paid by the due date. The due date can potentially be extended beyond April 15 to avoid a late filing penalty by applying for a tax filing extension.
The total amount of tax you owe the government is due by the normal tax due date along with your income tax return. Those who fail to file income tax returns will likely also fail to submit the appropriate amount of tax owed by the due date, since the purpose of a tax return is to calculate additional taxes owed. The IRS states there is that a failure-to-pay penalty of 0.5 percent per month on unpaid taxes which increases to 1 percent if the IRS sends a demand for immediate payment.
If you never filed tax returns and you owed additional taxes, you will also owe interest on unpaid taxes in addition to late filing and payment penalties. The IRS states that interest is charged on unpaid taxes until it is repaid and the interest rate is equal to the federal short-term rate plus 3 percent. If a tax goes unpaid for several years, accrued interest can be significant.
Several other consequences can arise from failing to file and pay taxes. After the IRS sends a request for unpaid taxes, it may attempt to collect unpaid taxes by garnishing wages, seizing funds in bank accounts or placing liens against your property. The IRS states that it is their general policy to help those who have not been in compliance with tax regulations get back into the tax system rather than pursue legal action, but criminal investigations can occur in cases of flagrant violations of tax laws.
Gregory Hamel has been a writer since September 2008 and has also authored three novels. He has a Bachelor of Arts in economics from St. Olaf College. Hamel maintains a blog focused on massive open online courses and computer programming.