Here's what happens if you don't pay your taxes (2024)

FAQs

Here's what happens if you don't pay your taxes? ›

You'll get hit with penalties

The Failure to Pay Penalty is 0.5% of the unpaid taxes for each month or part of a month the tax remains unpaid. The penalty won't exceed 25% of your unpaid taxes.

The IRS may allow you to pay any remaining balance over time in monthly installments through an Installment Agreement or possibly even settle for less than the full amount owed through its Offer in Compromise program.

The statute of limitations for tax fraud or evasion is generally three years after the date your return was due or the date you filed your return. The IRS cannot bring charges against you after this time unless you have omitted more than 25% of your income. Then, the IRS has six years.

When you owe more than $50,000 or $100,000 in taxes, the IRS will become very serious about collecting the outstanding balance. The agency can use all kinds of aggressive strategies to collect back taxes, and if you don't take action, you may face liens, levies, asset seizures, and other consequences.

Long-term payment plan (also called an installment agreement) – For taxpayers who have a total balance less than $50,000 in combined tax, penalties and interest. They can make monthly payments for up to 72 months.

The IRS offers a debt forgiveness program for taxpayers who meet certain qualifications. To be eligible, you must claim extreme financial hardship and have filed all previous tax returns. The program is available to certain people only, so be sure to check if you qualify.

If you have overdue taxes, the IRS may take money out of your bank account directly. We're often asked, “How is the government able to do this?” If the IRS does determine the appropriate action is taking money directly from your account, they will track down your bank account.

Failing to file a tax return can be classified as a federal crime punishable as a misdemeanor or a felony. Willful failure to file a tax return is a misdemeanor pursuant to IRC 7203. In cases where an overt act of evasion occurred, willful failure to file may be elevated to a felony under IRC 7201.

How does the government know if you don't pay taxes? ›

In order to convict you of a tax crime, the IRS does not have to prove the exact amount you owe. But such charges most often come after the agency conducts an audit of your income and financial situation. Sometimes they're filed after a tax collector detects evasion or fraud.

How Many People Go to Jail for Tax Evasion? 63.3% of the people involved in tax fraud cases were sentenced to prison in FY2021. The average length of sentence for tax fraud offenders was 14 months. In comparison, 68.7% of tax fraud offenders were sentenced to prison in FY2020 and spent an average of 16 months in jail.

What Happens if You Don't File Taxes for 3 Years? If you haven't filed taxes in three years, you can lose the chance to claim a tax refund. Additionally, the Internal Revenue Service may file a tax return (called a substitute for return or SFR) on your behalf, and then, the agency will try to collect the tax bill.

You owe $25,000 or less (If you owe more than $25,000, you may pay down the balance to $25,000 prior to requesting withdrawal of the Notice of Federal Tax Lien) Your Direct Debit Installment Agreement must full pay the amount you owe within 60 months or before the Collection Statute expires, whichever is earlier.

You can get one-time forgiveness, aka first-time abatement, on the following penalties: Failure-to-file penalties on individual, partnership, or S-corp tax returns. Failure-to-pay penalties. Failure-to-deposit penalties.