What If I Didn’t File Taxes Last Year?

This article guides you through the steps if you did not file taxes for a previous year, covering filing requirements, gathering information, submitting late returns, potential penalties and interest, and options for resolving tax debts.

Confirming Your Filing Obligation

The first step for an unfiled tax year is determining if you were required to file. This obligation is based on gross income, filing status, and age. The IRS sets annual income thresholds. For example, in 2024, a single filer under 65 generally needs to file if their gross income was at least $14,600. Married couples filing jointly have higher combined thresholds, such as $29,200 if both are under 65.

Certain circumstances trigger a filing requirement even if income falls below these thresholds. Net earnings from self-employment of $400 or more generally require filing a tax return regardless of age or other income. Receiving certain unearned income or advance premium tax credits may also necessitate filing. For comprehensive details, refer to IRS Publication 501, “Dependents, Standard Deduction, and Filing Information,” updated annually.

Gathering Information for Late Returns

Preparing an overdue tax return requires collecting financial documents detailing income, expenses, and potential deductions or credits. Essential income documents include Forms W-2 for wages, various Forms 1099 (e.g., 1099-INT, 1099-DIV, 1099-MISC, 1099-NEC), and Schedule K-1. Documents supporting deductions and credits, such as mortgage interest statements (Form 1098), student loan interest statements, charitable contribution records, or childcare expense statements, are important.

If documents are missing, several retrieval avenues exist. Contact former employers or payers directly for copies of W-2s or 1099s. A common method for obtaining income information reported to the IRS is to request a wage and income transcript, which provides data from various information returns for up to 10 tax years. Obtain this transcript online through the IRS “Get Transcript” service, by mail using Form 4506-T, or by phone. Accurate Social Security Numbers and other personal identification details are crucial for requesting and preparing these documents.

Filing Your Overdue Tax Returns

Once documents are gathered, prepare and submit the past-due tax return. For prior tax years, e-file is generally not an option; returns must be submitted via mail. Obtain the correct tax forms and instructions for the specific year from the IRS website.

Several options exist for preparing these returns. Some tax software providers offer prior-year versions, or you may consult a qualified tax professional specializing in delinquent returns. After completing the return, ensure it is signed and dated. Mail each tax year’s return in a separate envelope to the correct IRS mailing address, which varies by state and return type. Keep a copy of everything submitted, including the return, supporting documents, and proof of mailing (e.g., certified mail receipts).

Understanding Penalties and Interest

Failing to file or pay taxes on time can result in IRS financial consequences. Two primary penalties apply: Failure to File and Failure to Pay. The Failure to File penalty is generally more substantial, assessed at 5% of unpaid taxes per month (or part of a month) the return is late, up to 25% of the unpaid tax. If your return is over 60 days late, a minimum penalty applies, which is the lesser of a specific amount (e.g., $510 for tax returns due in 2024) or 100% of the tax owed.

The Failure to Pay penalty is 0.5% of unpaid taxes per month (or part of a month) the tax remains unpaid, capped at 25%. If both penalties apply in the same month, the Failure to File penalty is reduced by the Failure to Pay penalty, ensuring a combined monthly penalty does not exceed 5%. Interest accrues daily on any unpaid tax, including penalties, from the original due date until the balance is paid. The IRS sets these interest rates quarterly; the underpayment rate for individuals is often 7% per year, compounded daily. If a refund is due, penalties do not apply, but you must file within three years of the original due date to claim it.

The IRS offers penalty relief options, such as “First-Time Penalty Abatement” for taxpayers with a clean compliance history for the prior three years. This relief is available for failure to file, pay, and deposit penalties. Alternatively, taxpayers can request penalty abatement based on “reasonable cause” if the failure to file or pay was due to circumstances beyond their control, such as serious illness or natural disaster. Such requests require a detailed explanation and supporting documentation.

Resolving Unpaid Tax Debts

If you owe taxes for a prior year and cannot pay immediately, file the overdue return to mitigate the Failure to File penalty, which is often higher than the Failure to Pay penalty. Paying as much as possible, even if not the full amount, helps reduce both penalties and accruing interest. The IRS provides payment options for taxpayers facing difficulty.

One common solution is an Installment Agreement, allowing monthly payments for up to 72 months. Setting up an installment agreement can reduce the Failure to Pay penalty. Another option is an Offer in Compromise (OIC), allowing taxpayers to settle their tax debt for a lower amount than owed. The IRS accepts an OIC when there is doubt about the taxpayer’s ability to pay the full amount or the debt’s collectibility, and it requires a thorough financial review.

For taxpayers experiencing severe financial hardship, the IRS may grant “Currently Not Collectible” (CNC) status, temporarily delaying collection. While in CNC status, interest and penalties continue to accrue, but active collection actions like levies or garnishments are suspended. The IRS prefers to work with taxpayers to resolve outstanding debts, making communication crucial for finding a suitable payment resolution.