What Happens If You Skip a Year of Filing Taxes?

Filing taxes is an essential civic responsibility that every citizen must fulfill. However, there may be instances when individuals fail to file their taxes on time or skip a year of filing altogether. Understanding the consequences of such actions is crucial to avoid potential legal and financial complications.

Penalties and Interest

The Internal Revenue Service (IRS) imposes penalties and interest charges on individuals who fail to file their tax returns on time. These penalties are calculated based on the amount of unpaid taxes and the length of time the return is overdue.

Failure-to-File Penalty: A 5% monthly penalty is charged on the unpaid tax balance for each month or partial month the tax return is late. This penalty can accumulate up to a maximum of 25% of the unpaid taxes.
Failure-to-Pay Penalty: A 0.5% monthly penalty is charged on the unpaid tax balance for each month or partial month the taxes remain unpaid. This penalty can also accumulate up to a maximum of 25% of the unpaid taxes.

Substitute for Return

In cases where an individual fails to file a tax return, the IRS may prepare a “substitute for return” based on available information, such as W-2 forms and 1099 forms. This substitute return will not include any deductions or credits that the taxpayer may be entitled to, potentially resulting in a higher tax liability.

Refund Forfeiture

If an individual is due a tax refund but fails to file a return within three years of the due date, they will forfeit the refund. This means that the government will keep the refund, even if the taxpayer is eligible to receive it.

Collection Actions

If an individual fails to pay their taxes or resolve their tax debt, the IRS may take collection actions, such as:

Tax Levy: The IRS can seize and sell property to satisfy the tax debt.
Tax Lien: The IRS can place a lien on property, preventing the taxpayer from selling or refinancing it until the debt is paid.

Long-Term Consequences

There is no statute of limitations on unfiled tax returns. This means that the IRS can pursue collection actions against an individual indefinitely, even if many years have passed since the taxes were due.

What to Do If You Missed a Filing Deadline

If you have missed a tax filing deadline, it is important to take action as soon as possible to minimize the penalties and interest charges. Here are some steps you can take:

File Your Return Immediately: File your tax return as soon as possible, even if you cannot pay the taxes in full.
Contact the IRS: Explain your situation to the IRS and inquire about payment options.
Consider an Installment Agreement: You may be able to enter into an installment agreement with the IRS to pay your tax debt over time.
Seek Professional Help: If you are struggling to resolve your tax debt on your own, consider seeking professional help from a tax advisor or enrolled agent.

Skipping a year of filing taxes can have serious consequences, including penalties, interest charges, refund forfeiture, and collection actions. It is crucial to file your tax returns on time to avoid these negative outcomes and fulfill your civic responsibility. If you have missed a filing deadline, take action immediately to mitigate the consequences and resolve your tax debt.

What to do if you Missed a Year or Misfiled

FAQ

Can you skip filing taxes for a year?

Any year you have minimal or no income, you may be able to skip filing your tax return and the related paperwork. Before you decide to skip your return this year, consider whether it might be worthwhile to file.

What happens if you miss a year of tax return?

If you owe taxes, a delay in filing may result in a “failure to file” penalty, also known as the “late filing” penalty, and interest charges. The longer you delay, the larger these charges grow. It may result in penalty and interest charges that could increase your tax bill by 25 percent or more. Losing your refund.

Can you file 2 years of taxes at the same time?

Each tax year has to be filed separately using the forms for the specific tax year. They cannot be combined in any way–do not even put them in the same envelope when you mail them. Software for past years is available back to 2019.

What happens if you don’t file taxes by April 18?

An extension to file is not an extension to pay. An extension to file provides an additional six months with a new filing deadline of Oct. 16. Penalties and interest apply to taxes owed after April 18 and interest is charged on tax and penalties until the balance is paid in full.

What happens if you skip your taxes?

While it may take a few months, a notification from the IRS will be arriving if you skip your taxes. The IRS is actually very forgiving when it comes to filing late returns or using relief options to get your debt squared away. You really only have to fear the IRS if you’re trying to evade your tax duties.

What happens if I don’t file my taxes on time?

If you owe money and fail to file your taxes on time, you’ll likely be assessed what’s called a Failure to File Penalty. The penalty is 5% of your unpaid tax liability for each month your return is late, up to 25% of your total unpaid taxes.

What happens if I fail to file my taxes?

Late taxes are subject to a penalty . The penalty for Failure to File is 5% of the unpaid taxes for each late month up to 25% of your taxes due. If you have to file late, it’s in your interest to file within one month of the due date — otherwise, it will cost you.

What happens if you forget to file your taxes?

If you only forgot to file last year’s return (or the one for the year before that), you’re not in hot water — yet. A tax return that’s only a couple years late will net you some penalties, but that’s it. More than three years overdue, however, and the real consequences set in. What are the risks of filing your taxes late?