Got a tax return (or two… or more) that you never got around to filing?
Maybe life got busy. Maybe the paperwork felt overwhelming. Maybe you were dealing with a major personal or financial crisis. Or maybe you just didn’t think you could pay what you owed—so avoiding it felt easier.
Whatever the reason, the idea of going back and filing those old returns can feel like a heavy weight. The good news? It’s not too late to fix it, and you don’t have to do it alone.
Often, we procrastinate because filing taxes seems more overwhelming than it actually is — and sure, it’s intimidating if you try to go at it alone — but if you have a trustworthy someone on your side who is skilled at this sort of thing, it’s really not as bad as it seems.
We would be happy to work through this with you if you have an unresolved tax return or two from the past few years.
But no matter whether you have earned a refund OR owe taxes for any given year… You want to file those tax returns. You don’t want unfiled tax returns looming over you because there are some bad things that can happen when you don’t file your taxes…
If you don’t owe taxes
We’re starting on the lighter side here. Even if you don’t owe taxes, there are some negative consequences for not filing.
- You don’t receive a tax refund. If you are due a refund, but you don’t file — simply put, you won’t get the refund. This applies to federal taxes, as well as most states with an income tax. You have three years to file your federal return, but after that, you lose the opportunity to claim your refund.
- Business owners lose out on carrying over losses. When you have business or investment losses, the IRS allows you to carry forward those losses to offset future years’ earnings. If you don’t file a return the year the loss occurs, you cannot carry losses forward from that year.
- You can miss refundable tax credits. If you qualify for a tax credit like the Earned Income Tax Credit (EITC), you have to file a return to claim it. This is a refundable credit, and it puts money in your pocket. If you don’t file, you lose it altogether.
- The IRS might file a return on your behalf… without you (and any mistakes they make will likely NOT be in your favor). In some cases, when you don’t file a tax return, the IRS automatically completes a substitute federal return (SFR) for you. This return contains information from W2s, 1099s, or other forms the IRS has received from your employer, your bank, or other entities. Typically, the SFR only has one exemption, no dependents, and the standard deduction.
If you qualify for more than one exemption, have dependents, or itemize instead of claiming the standard deduction, an IRS-prepared SFR will show a higher tax liability than if you filed yourself. In some cases, you might not have filed because you believed you owed no tax… but under the SFR that the IRS files on your behalf, you actually DO owe tax… and some of the worst consequences (that I will be sharing below) begin to kick in.
- The audit time clock never starts. When you file your tax return, the IRS has three years to audit it. After that, the statute of limitations kicks in, and the agency cannot typically audit that return. However, if the IRS generates an SFR for you, it can be audited at any time. Again, if you file, you avoid the SFR. The IRS usually waits a few years after the due date to complete the SFR.
- You may not qualify to include taxes in a bankruptcy. To qualify for both Chapter 7 and Chapter 13 bankruptcy, you need to be current on your tax filing obligations. In most cases, you must have filed the last two years of returns for Chapter 7 and the last four years of returns for Chapter 13.
- You may have trouble getting loans. If you don’t file a tax return, loans are much more difficult to obtain. Financial institutions generally want to see copies of filed tax returns when you apply for a mortgage, personal loan, business loan, or a loan for higher education.
If you do owe taxes
Of course, there are additional consequences of owing taxes but not filing a return for unfiled tax returns if you end up owing the IRS. Here are a few:
- Special penalties. If you fail to file a Federal tax return by the due date, you face a special “failure-to-file” penalty if you owe taxes. The IRS charges 5% of what you owe every month you’re late, up to 25%. Wait more than 60 days? You’re looking at a minimum fine of $510 or 100% of the tax (in 2025) — whichever is less.
- Possible incarceration. Jail time is rare — but possible. Under federal law, you can face up to a year in jail and up to $25,000 in fines for not filing your return. The penalties are even stricter if you commit fraud. Fortunately, you cannot go to jail simply for owing taxes. Jail time is typically invoked for not filing or for purposefully evading taxes.
- Publicly posted tax liens. This is when the IRS files a public document called “Notice of a Public Tax Lien.” Consequently, the taxes you owe show up on your credit report. This negatively impacts your credit and puts you in the crosshairs of all kinds of nefarious marketers.
- Wage garnishment. This takes place when the IRS contacts your employer to have wages withheld from your paycheck to satisfy an IRS tax debt.
- Bank levies. The IRS can contact financial institutions or banks you do business with to levy your bank account.
There are a few more things that could happen, but I’ll spare you the especially painful consequences.
I’ve just loaded you with warnings as to why you should file, so now it’s time for the good news:
Thinking Outside The Box Law, Inc. is here for you — and we are a no-shame, no-judgment zone. You can bring us your pain, mistakes, fears… and we will work it through, step by step, to set you up for success. We simplify the seemingly overwhelming process of sorting out unfiled taxes tax returns, so you can go to bed at night assured that you have a tax-savvy DuPage professional working on your behalf.
We exist in order to serve you in this way, and it’s our joy to do so.
Here for you,
Jon Dowat
Attorney at Law