What happens if you don’t file your taxes?

As the tax deadline looms, you may be giving your tax to-do list a serious side eye. Whether filing feels like too big of a task or you’re stressed about paying your tax bill, you may be wondering, “what happens if I don’t file my taxes?”

Rest assured — H&R Block is here to help you understand what can happen, your options, and why you should definitely do your taxes.

Already know you can’t pay your taxes? If your budget is already tight due to inflation or other financial woes, we understand how stressful this time can be. Don’t worry – we’ll outline where to go from here. 

First, let’s debunk a common fear. You might think not doing your taxes means prison time. You’re not alone. In fact, in a recent H&R Block and OnePulse survey, 70% of people believed they could go to jail for not doing their taxes. In reality, that usually only happens in extreme cases.

Widespread misconceptions like this show how critical it is to rely on experts, like H&R Block, for important financial matters.

What really happens if you don’t do your taxes

There are generally two penalties you can face if you don’t do your taxes and you owe the IRS.

They are the:

• Failure to Pay Penalty
• Failure to File Penalty

We’ll get into the details, but a key thing to note is: failing to file costs you more than failing to pay.

Failure to Pay Penalty: What happens if you don’t pay your taxes

The penalty for not paying the taxes you owe on your return is 0.5% of the unpaid tax for each month or partial month until you pay. The penalty maxes out at 25% of your unpaid taxes.

After some time, the IRS may notify you with intent to levy (ex., garnish your wages, take money from your bank accounts). If you don’t pay your taxes within 10 days of that notice, your penalty bumps up to 1%.

Failure to File Penalty: What happens if you file your taxes late?

The penalty for not filing your return is typically 5% of the tax you owe for each month or partial month your return is late. This penalty also maxes out at 25% of your unpaid taxes.

If your return was over 60 days late, the minimum penalty is $435 for 2022 or 100% of the tax on the return — whichever is less.

If you have both penalties

Were you unable to do your taxes all together? That means you could be facing both penalties. If both apply, the combined penalty is 5% (4.5% late filing and 0.5% late payment) for each month or partial month, up to 25%.

After five months, the Failure to File Penalty will max out, but the Failure to Pay Penalty keeps going until the tax is paid, up to 25%.

The maximum total penalty for both penalties is 47.5% of the tax (22.5% late filing and 25% late payment).

Interest on top of penalties

Unfortunately, penalties aren’t your only worry if you don’t file or pay your taxes on time. The IRS will also charge interest on your past due taxes.

The IRS will start accruing interest on the date your tax bill was due – typically, the date of the filing deadline. To calculate the interest rate, the IRS starts with the federal short-term rate and then stacks on another 3%.

Wait, what if I don’t make enough to file? Or if I don’t owe?

It’s true; not everyone has to file a return. There’s a minimum income limit to file, so you may not be required to file. But there’s a downside to not filing: You can’t get any money back that you’re owed. 

If you had taxes taken out of your pay (paycheck withholding), you could get a refund back on any taxes you overpaid.

And, maybe more importantly, by not filing, you could be missing a payout of refundable credits, such as the Earned Income Tax Credit (EITC).  Said another way, a refundable credit means you get money back even if you don’t owe taxes.

The bottom line: You must file a return to get this money.

I know I owe taxes, but I can’t pay. What do I do?

If you’re in a tough spot financially right now, you do have options and there are immediate steps you should take.

For starters, file your return on time – even if you can’t pay. Filing by the tax deadline lets you avoid the Failure to File Penalty mentioned above. If you’re tight on time and money, at least file an extension. That will buy you until Oct. 15 to complete your return. However, the extension doesn’t buy you time to pay.

Next, you can start to pay the IRS in monthly installments. This gives you time to pay your taxes over time instead all at once by Tax Day.

The most common IRS payment plan options are:

• Make a one-time payment by debit card or credit card
• Enter a short-term payment plan (180 days or less).*
  • There are no set up fees and you can pay from your bank account (Direct Pay), or by check, money order or debit/credit card (fees apply when paying by card).
• Enter a long-term payment plan (180 days or more).*
  • If you use direct debit, there’s a $31 set-up fee (waived for low income).
  • If you don’t use direct debit, there’s a $130 set-up fee.

*This includes your accrued penalties and interest until the balance is paid in full.

You can set up an installment agreement through the online payment agreement application, by filing Form 9465, by phone or in person at a local IRS office. If you owe $50,000 or more, the details for requesting an agreement can differ.

Need help? H&R Block has the expertise to help you understand your payment plan options and walk you through the application process.

H&R Block can help you with your taxes

Taxes can be a stressful time for many. You don’t have to go it alone. Rely on the expertise of H&R Block to help you with filing your taxes, an extension or for help with an IRS payment plan.

Definitely do your taxes. Find a tax pro today!