Are you worried about your past tax returns? You may need to pay taxes you didn’t before or perhaps you didn't get around to filing a return for a few... decades. Whatever the case, don’t assume the IRS will just ignore your slip ups. Even if you haven’t gotten a notice from them, the mistakes are on your record and they will catch up to you.
The consequences for catching a misfiled return will be much less serious if you report them yourself. If the IRS has to seek you out to get you to file past tax returns, your situation could get very bad, very quick.
Consequences for Failing to File Taxes
The penalties for not filing past tax returns can be as harsh as not filing a current return. This means you can be subject to further audits, fines, or even jail time. Here’s a breakdown of some of the major penalties.
Failure to File Penalty: If you owe taxes, you may get hit with a failure to file penalty. This is also known as the “late filing” penalty. You will also accrue interest charges. If your payments are large enough, this could result in a much higher payment than if you had just filed. In fact, the longer you go without filing, the more interest accrues and compounds. This could increase your bill by 25 percent or even higher.
Losing Your Refund: If you are owed further tax refunds but don’t file past tax returns, there actually is no further penalty. However, you will not be able to collect your refund, and may lose it altogether.
Statues of Limitation: After the refund statue expires, not only can you not collect your refund, you also cannot apply the credits to tax years that you underpaid. On the other hand, there is no statue of limitation on collecting taxes. This means no matter how long you try to wait out not filing, the IRS can still come and collect.
As you can see, it is important to file past tax returns if you must. Payment plans can be set up if you owe money, and it’s not worth going to jail or losing your assets over.