Representing Non-filers: Un-filed tax return issues

There are many reasons why individuals fail to file their tax returns. In some cases, a change in filing status—such as the death of a spouse or a divorce—can cause confusion and delay. For others, procrastination or life circumstances may be to blame. However, the most common reason is the inability to pay the taxes owed. Unfortunately, failing to file a tax return can lead to serious consequences, including those outlined below.

Why File a Tax return?

You are legally required to file an income tax return for any year in which you meet the filing requirements, which are based on your age, filing status, and gross income. Beyond legal compliance, there are several important practical reasons to file a tax return, including:

  • To report your lifetime earnings as the basis for Social Security retirement or disability benefits;

  • To document income needed to qualify for state benefits such as unemployment compensation or workers' compensation;

  • To support applications for loans, such as for purchasing a home or financing a business;

  • To apply for financial aid for higher education;

  • To claim a refund — you cannot receive a refund without filing, and you may forfeit the refund if you wait too long (generally a three-year window);

  • To claim the Earned Income Tax Credit (EITC), if eligible, even if you are not otherwise required to file — this too is subject to the three-year statute of limitations.

Consequences of Not Filing a Tax Return

Failing to file your tax returns can seriously jeopardize your financial security and lead to significant long-term consequences. Beyond missing out on federal and state benefits, you may end up owing more taxes and facing a range of civil and criminal penalties, including:

1. Criminal Charges

Willful failure to file a tax return is a misdemeanor under Internal Revenue Code (IRC) § 7203. If there is an overt act of evasion, the charge may be elevated to a felony under IRC § 7201. You may face up to one year of imprisonment for each unfiled year, with a maximum penalty of five years.

2. Civil charges

If the IRS determines that your failure to file was fraudulent, you may be subject to the Fraudulent Failure to File (FFTF) penalty under IRC § 6651(f), which carries substantial financial consequences.

3. Tax Penalties

If you owe taxes and fail to file your return by the due date (including any extensions), the IRS may impose:

  • A late filing penalty of 5% per month (up to 25%) of the unpaid tax;

  • A late payment penalty of 0.5% per month;

  • Accrued interest on any unpaid tax and penalties.

4. Substitute for Return (SFR)

If you fail to file, the IRS may prepare a Substitute for Return (SFR) on your behalf using third-party information (e.g., from employers or banks). This return does not include any deductions, exemptions, or credits you may be entitled to, often resulting in a higher tax liability.

5. Not running the statues of limitation

The statute of limitations for assessment and collection does not begin until a return is filed. If you never file, the IRS can pursue collection indefinitely.

What Should I Do?

No matter the reason for not filing, it’s important to take action and file your tax returns as soon as possible. We can assist you in determining which years you need to file, selecting the appropriate filing status, and exploring affordable options to address any taxes owed on your delinquent returns.

Keep in mind that your obligation to file prior-year tax returns remains in effect—even if your records are incomplete or unavailable. Likewise, the quality or organization of your records does not eliminate your filing requirement.

We recommend requesting Wage and Income transcripts from the IRS for each year you need to file. If you're unsure which years are missing, it's also helpful to request a full IRS Transcripts Report.