Question:

What are the penalties for not filing my return?

Penalties And Unfiled Taxes

Naturally, the quicker you file your back tax return, the sooner you can avoid penalties and interest. Of course, the IRS has penalties that apply to not paying your taxes on time. They also have penalties for not filing a tax return (unfiled tax returns).

Filing late. If you owe back taxes due to not filing your tax return on time, the IRS penalty is known as the failure-to-file penalty. It is usually 5% for each month in which your taxes are unpaid. It cannot exceed 25%.

If your reason for not filing on time was based on fraud, the penalty goes up to 75%. It starts at 15% for each month your taxes remain unpaid. If you can show the IRS a reasonable cause for not filing on time (and not willful neglect), you may avoid this penalty.

Paying late. Failure to pay penalty. Back taxes can accumulate due to your not paying taxes on time. This does not count during the automatic 6-month extension period if you have paid at least 90% of your unpaid tax bill upon filing.

Combined penalties. There is a combined penalty discount if you are involved in both of the above situations. There is a minimum penalty of $100 or 100% of the unpaid tax if you file your tax return more than 60 days past its original (or extended) due date.

If you are involved in an installment agreement, the penalty amount will decrease. However, you need to have filed your tax return on time, just not paid your taxes, to get this penalty reduction. If you have not paid your back taxes after many attempted communications from the IRS, you watch out. If the IRS determines that you are involved in tax evasion, fraud, or purposely failed to file a return – you may be facing criminal prosecution.