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What Happens If You Don’t File Your Tax Return?

By , April 13th, 2018 | No Comments

What if you don't file a tax return?The Internal Revenue Service automatically approves every single request for an extension that’s filed on time — but what if you skip that step and just don’t file your tax return?

This depends on what kind of income you received for the year and whether you owe money or are entitled to a refund.

Income from Social Security — both retirement and disability benefits — is non-taxable if that’s the only type of pay received for the year.

If You Don’t File Your Tax Return…

However, both programs allow people to work part time and if annual earnings exceed certain thresholds, then the Social Security benefits become taxable (stay tuned for a follow-up article tomorrow that will spell out the different cutoff points for this).

If you had the correct amount of income tax withheld this year or all of your income consists of Social Security benefits — either for retirement or disability — you might not need to file a return at all.

If your income in 2017 came from an employer, it’s highly unlikely that you had the correct amount of income tax withheld that year simply due to the fact that the tax brackets for the year changed retroactively upon the enactment of the Tax Cuts and Jobs Act.

About 80% of taxpayers are owed refunds — although some of it has to do with deductions — and about 6% of taxpayers face higher taxes this year compared to previous years.

If you’re owed a refund yet don’t file by the deadline, you have three years to claim that refund, and after that the IRS gets to keep the money.

Should you remember to apply for an extension, that would give you until October 15, 2021 to claim that refund — and if you apply for a second extension in time for the deadline, you might be able to push out the last day you can claim a refund to December 15, 2021.

In the meantime, you can also find out whether you’ve got an unclaimed refund by visiting this page on the IRS website.

Dependents and Low Earners

Somewhat related to this, if your income for the year falls below certain thresholds, you may not need to file a federal tax return — and possibly not at the state level either.

If you file as self-employed but had net earnings — meaning income after expenses — below $400, you don’t need to file a federal tax return unless you received subsidies for health insurance.

If someone else claims you as a dependent, you don’t have to file an income tax return if you make less than $6,350 from being someone else’s employee and have less than $1,050 in income from investments; the threshold for self-employment also applies here.

However, any dependents who had tax withholding on earnings below the thresholds mentioned above should file tax returns so as not to miss the opportunity to claim that money back as refunds.

That’s also true for those who aren’t dependents yet earned less than the thresholds mentioned below — they forfeit the opportunity to claim refunds of withheld taxes.

Filing Status Age at December 31, 2017 Must file if gross income is
Single Under 65 at least $10,350
65 or over at least $11,900
Married Filing Jointly Both spouses under 65 at least $20,700
Both spouses 65 or over at least $23,200
One spouse under 65 at least $21,950
Married Filing Separately N/A at least $4,050
Head of Household Under 65 at least $13,350
65 or over at least $14,900
Qualifying Widow(er) Under 65 at least $16,650

Source: Intuit

Penalties for Not Filing

Now if you happen to owe money to the IRS and don’t file a return or a request for an extension by the April 17 deadline, you get hit with a penalty: 5% of your unpaid bill is levvied for every month past the deadline, up to a maximum of 25%.

The IRS will also mail you several reminders to file your return, and if you continue to ignore them, the agency may file a return on your behalf .

If the agency files a return on your behalf, it’s going to be the never works out in your favor: You won’t get any deductions nor credits you might have been entitled to otherwise.

Interest on Late Payments

And that 25% maximum penalty for not filing isn’t the end of things either. The agency also charges interest for late payments, to the tune of 0.5% of the unpaid balance for every month you are late — it also kicks in if you don’t reply within 21 days to a request for payment.

The interest also has a 25% cap. For more details on how the IRS calculates interest and penalties, check out this page on the agency’s website.

Additionally, you may face criminal prosecution for not filing, and you owe more than $25,000, you might receive a visit from an IRS agent trying to collect payment.

More Consequences of Not Filing

Once your outstanding debt to the IRS reaches $51,000, including interest and penalties, the agency has the ability to revoke your passport.

There’s one more cost associated with not filing your tax return within three years of the due date: You lose the opportunity to earn credits toward your future Social Security retirement benefits — even if your reason for not filing is that you don’t owe money.

What About Not Filing State Taxes?

As for state income tax returns, the consequences of not filing varies based on where you live.

And even if you happen to reside in one of the states that don’t have income taxes, you still might be entitled to a refund based on other taxes you may have paid. But if you skip filing, you forego the chance to claim that refund.

Long story short, it’s so much easier to file for an extension than to blow off filing a return altogether. Even if you don’t owe any money, you might be missing out on the opportunity to claim a refund.

Readers, have you filed your income tax returns yet?

Read More About Taxes

As the tax deadline approaches, you can answers to any burning questions about filings by checking out our archives:


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