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Published: Apr 13, 2023 7 min read
Man looking worried over his laptop with tax forms in the background
Eddie Lee / Money; Getty Images

The end of tax season is upon us. And while you’re not alone if you haven’t quite reckoned with that yet — IRS data shows that only 90 million Americans had filed their income taxes as of March 31 — you are almost out of time.

Tuesday is the tax deadline. But if you're prone to procrastination, you might be tempted to consider: What happens if you don’t file in time?

Not everyone is required to file a tax return, and even if you are, there is no penalty for failing to file if you're set to receive a refund. On the other hand, if you owe, there are several courses of action the IRS can take.

Here are some of the consequences you may face if you skip filing your taxes this year.

You could miss out on your tax refund

If you're due a tax refund from the IRS, you're on a pretty tight schedule to file in order to claim that money. Federal tax refunds have a three-year statute of limitations — if you allow it to expire, you might miss your chance to get that money. You're essentially letting the government hold onto your funds longer.

You could miss out on free tax benefits

Regardless of whether you owe, failing to file your taxes could lead you to missing out on some solid benefits you'd be happy to have, says Kathy Pickering, chief tax officer at H&R Block. "If they don't file, they may be leaving money on the table," she says, especially credits like the earned income tax credit or the child tax credit.

Pickering adds that this applies especially to taxpayers who fall under the income threshold for filing but may be eligible for refundable credits.

"It's a good thing to keep filing, just so that you're getting everything that you're entitled to," she adds.

You could owe the IRS penalties and interest

Owing Americans who don’t file their taxes on time will first receive a summons from the IRS imploring them to get their taxes filed as soon as possible. Shortly after that, the real penalties start rolling in.

The first financial hits taxpayers take are the Failure to File and Failure to Pay penalties. If you fail to file your taxes before Tuesday, you are penalized 5% of the unpaid tax value for every month (or part of a month) late the filing is under Failure to File. This fee can accumulate, maxing out at 25%.

If you file but fail to pay the owed amount, you are penalized 0.5% of that amount under Failure to Pay. Like Failure to File, the penalty increases to a maximum of 25% of your owed sum. If you suffer both penalties, the IRS will only charge you a 4.5% Failure to File fee, plus the 0.5%, making for a total of 5% still.

The IRS will additionally charge interest on these penalties. Currently, the agency’s interest rate stands at 7%. This interest compounds daily. You are notified by the IRS of the date it will begin charging interest on these fees.

You could face an IRS levy or tax lien

The Federal Payment Levy Program, or FPLP, is a levy through which the IRS can recoup unpaid federal taxes. Delinquent taxpayers could see multiple different federal payments garnished to cover owed taxes — things like Social Security benefits, military retirement funds, federal wages and more.

And depending on your taxpayer status, you may even find a federal tax lien placed against your property if you fail to file and pay your owed taxes. The IRS can make a legal claim to both your current and future property (including homes and cars), and it notifies creditors to this claim.

You could incur criminal charges

You may have nightmares about a worst-case scenario where the IRS knocks on your door with the police, ready to take you away on tax evasion charges. Missing the deadline once doesn’t put you at risk, and jail time is extremely unlikely for most taxpayers, but it is technically possible.

Those arrested on tax evasion charges can face up to five years in prison for tax fraud and evasion. Again, this is rare — it’s worth noting that the IRS conducted just 2,550 criminal investigations in 2022, meaning your chances of being pursued are very slim if you’re a well-meaning taxpayer who just allowed the deadline to slip your mind.

How to get an extension on your taxes

Sometimes, life does get in the way, and tax season can come and go before you even know it. If this sounds like you, you can file a deadline extension with the IRS to keep yourself out of all this trouble.

Individual tax filers can extend their deadline to Oct. 16 by filing Form 4868 through IRS Free File. This is automatic; you must simply need to estimate your tax liability and pay any amount due.

Moreover, if you live in one of seven states rocked in 2022 by severe weather events, the IRS has extended tax deadlines for you. These states include New York, Arkansas, Tennessee, Mississippi, California, Georgia and Alabama. Deadline extensions differ from state to state, so if you're a resident of any of these states you should seek out what your extended deadline is.

Pickering points to a recent study by H&R Block which shows 69% of Americans are concerned about their financial stability. Still, she advises Americans to simply get those filings done, in order to mitigate further hardship.

"Even if you do owe some money, the best thing you can do is file your taxes or an extension to stop the meter on those penalties," she says.

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