What Happens If You Skip a Year of Not Filing Taxes? Consequences & Next Steps

Missing a tax filing deadline can happen to anyone. Whether you were overwhelmed by self-employment paperwork, confused about your filing requirements, or simply forgot to file, skipping a year can feel like a mistake that’s too late to fix. But the truth is, the longer you wait, the greater the consequences—and the more difficult the resolution becomes.

Many taxpayers who miss a tax year may believe the problem will quietly go away, especially if they didn’t owe much or were due a refund. Unfortunately, that’s not how the IRS operates. Not filing taxes, even a single unfiled return can trigger penalties, delay future refunds, or lead to more aggressive enforcement measures.

If you’ve missed a year—or more—of filing taxes, understanding the consequences and your options is the first step toward regaining control. Here’s what you need to know about the risks of skipping a tax year and how to get back into compliance before things escalate.

The Consequences of Not Filing Taxes

The IRS penalizes failure to file far more aggressively than failure to pay. When you miss a filing deadline, the first penalty you face is the failure-to-file penalty, which can be as much as 5% of the unpaid tax per month, up to a maximum of 25%. If the return is more than 60 days late, you’ll also face a minimum penalty—either $485 (for tax year 2025) or 100% of the unpaid tax, whichever is less.

In addition to penalties, interest begins accruing on any unpaid balance from the day after the return was due. The longer you delay, the more you’ll owe—regardless of whether you eventually pay the tax due or not.

Even if you were owed a refund and didn’t file, that money doesn’t automatically stay available forever. In fact, the IRS operates under what’s known as the 3-year rule: taxpayers have three years from the original due date of a return to claim a refund. After that point, the refund is permanently forfeited, and the IRS keeps the funds. For example, if you didn’t file your 2021 return, originally due April 18, 2022, the deadline to claim your refund is April 18, 2025.

Missing out on a refund is one of the most common and most avoidable mistakes for taxpayers who skip a filing year.

IRS Substitute for Return (SFR)

One of the more severe consequences of prolonged inaction is the IRS preparing a Substitute for Return (SFR) on your behalf. This is not a service—it’s a method the IRS uses to assess tax liability using only the income information they have on file, typically from W-2s, 1099s, and other third-party sources.

What’s missing from an SFR is everything in your favor. The IRS will not include deductions, tax credits, business expenses, or dependents. This often results in a much higher tax bill than if you had filed yourself. Once the IRS finalizes the SFR, they can begin collections based on that inflated figure.

At this stage, penalties and interest continue to accumulate, and the IRS may begin collection efforts without further warning.

How Long Can You Go Without Filing?

A common misconception is that tax obligations “expire” if ignored long enough. That’s only partially true. The statute of limitations on collections is generally 10 years from the date the tax is assessed. However, for this clock to start, the IRS must first assess a tax bill—and that only happens if you file a return or they prepare an SFR.

If you never file, there is effectively no statute of limitations. The IRS can pursue the unfiled return indefinitely. This means the longer you wait, the more vulnerable you remain to enforcement actions.

IRS Enforcement Actions

Once the IRS assesses a tax liability—either through a filed return or an SFR—it has a full suite of enforcement tools at its disposal. These include:

• Wage garnishment: The IRS can contact your employer and begin withholding a portion of your paycheck to satisfy your tax debt.
• Bank levies: They can freeze and seize money from your bank accounts to cover the balance due.
• Tax liens: These are public records filed against your property, affecting your credit and making it difficult to sell or refinance assets.
• Passport restrictions: Under the FAST Act, the IRS can notify the State Department of seriously delinquent tax debts (generally over $62,000). This can lead to denial or revocation of your U.S. passport.

The IRS doesn’t always act immediately, but when it does, the consequences can be financially and personally disruptive. Once collection activity begins, options become more limited and costlier to resolve.

How to Fix Unfiled Tax Returns

The good news is that even if you’ve missed a year—or several years—you can still take action to correct the situation. The IRS is often more lenient with taxpayers who voluntarily come forward rather than waiting to be contacted.

The first step is to file any missing returns, starting with the most recent year and working backward. If you’re within the 3-year window for a refund, filing quickly may allow you to recover money that would otherwise be lost. Filing these back returns also stops the failure-to-file penalty and may reduce other penalties if you qualify for relief.

If you can’t afford to pay the full amount you owe, the IRS offers several payment resolution options under its Fresh Start Initiative:

• Installment agreements allow you to pay what you owe over time.
• Offer in Compromise allows you to settle your tax debt for less than the full amount if you meet certain income and asset criteria.
• Currently Not Collectible status temporarily delays IRS collection activity for taxpayers facing extreme financial hardship.

Getting professional help can significantly improve your outcome. A CPA or tax resolution specialist can:

• Reconstruct lost income records and deductible expenses
• Accurately prepare multiple years of back taxes
• Ensure you’re claiming all eligible deductions and credits
• Communicate with the IRS on your behalf
• Strategically approach IRS collections and negotiations

This is particularly important for self-employed individuals and gig workers, where income documentation may be incomplete or inconsistent.

Take Action Before the IRS Does

If you’ve missed a year of taxes, the worst thing you can do is nothing. The IRS won’t forget, and over time, the consequences only grow more serious. The sooner you file, the more control you have over the outcome—including reducing penalties, claiming refunds, and avoiding enforcement.

Dimov Tax specializes in helping individuals, gig workers, and business owners file back tax returns, negotiate with the IRS, and develop affordable solutions to get back on track.

Missed a tax year? We can help you file back taxes, claim your refund if eligible, and minimize penalties before enforcement begins. Contact Dimov Tax today for professional assistance in resolving your unfiled returns and restoring peace of mind.

Common Questions