Every year, millions of Americans are required to file a tax return with the IRS. While some may think they can skip filing—especially if they live abroad or believe they don’t owe taxes—the IRS takes failure to file very seriously. The penalties for not filing taxes in America can add up quickly and, in some cases, lead to more serious consequences.
Important Note: If you don’t owe any taxes, the IRS will not charge you failure-to-file or failure-to-pay penalties. However, you could still lose out on refunds or certain tax benefits if you don’t file.
If you do owe taxes and fail to file, the penalty is generally 5% of the unpaid tax for each month (or part of a month) your return is late, up to a maximum of 25%. If your return is more than 60 days late, the minimum penalty is the lesser of $485 (for 2024) or 100% of the tax owed. The IRS also charges a failure-to-pay penalty of 0.5% per month on unpaid balances, plus daily compounding interest. In severe cases, not filing at all can result in IRS collection actions or even criminal charges.
Let’s go over the different types of penalties in detail—including late filing, late payment, interest, and special considerations for Americans abroad—so you understand exactly what’s at stake and how to avoid them.
Failure-to-File Penalty
The most common penalty for not filing taxes on time is the failure-to-file penalty.
- The penalty is 5% of the unpaid tax for each month (or part of a month) that your return is late.
- It is capped at 25% of your unpaid taxes.
- If your return is more than 60 days late, the minimum penalty is the lesser of:
- $485 (for tax returns due in 2024), or
- 100% of the tax owed.
This means that even if you owe a small amount of tax, failing to file could result in a significant penalty.
Failure-to-Pay Penalty
If you file your return but don’t pay the taxes owed, the IRS imposes a failure-to-pay penalty.
- The penalty is 0.5% of your unpaid taxes for each month (or part of a month) past the due date.
- It continues to accrue until you pay in full, up to a maximum of 25%.
- If both the failure-to-file and failure-to-pay penalties apply in the same month, the failure-to-file penalty is reduced by the amount of the failure-to-pay penalty, making the combined penalty 5% per month.
Interest on Unpaid Taxes
In addition to penalties, the IRS also charges interest on any unpaid tax balance.
- Interest is calculated daily and compounds until the balance is paid.
- The interest rate changes quarterly and is based on the federal short-term rate plus 3%.
This means that even small unpaid amounts can grow significantly over time.
What Happens If You Don’t File at All?
Not filing a tax return at all can lead to more severe consequences:
- Substitute for Return (SFR): If you don’t file, the IRS may file a return on your behalf based on the information it has (such as W-2s, 1099s, or other reports). These returns don’t include deductions or credits you may qualify for, often leading to a higher tax bill.
- Collection Actions: The IRS can garnish wages, place liens on property, or seize assets.
- Loss of Refunds: If you are owed a refund, you must file within three years of the original due date to claim it. After that, the money is forfeited.
- Criminal Charges (in rare cases): While most cases are civil, willfully failing to file taxes can result in criminal prosecution, fines up to $25,000, and even prison time.
Special Considerations for Americans Abroad
Living outside the United States doesn’t exempt you from filing US taxes. The United States is one of the few countries in the world that taxes based on citizenship rather than residency. This means that whether you live in New York, Paris, or Tokyo, as a US citizen or green card holder, you are still required to file an annual US tax return if your income is above the filing threshold.
However, Americans abroad have additional considerations when it comes to IRS compliance and potential penalties.
Foreign Earned Income and Tax Benefits Abroad
The IRS offers certain tax benefits that can reduce or even eliminate your US tax bill while living overseas. For example:
- Foreign Earned Income Exclusion (FEIE) allows you to exclude up to $126,500 (for 2024) of earned income from US taxation if you meet the Physical Presence Test (330 full days outside the US in a 12-month period) or the Bona Fide Residence Test.
- Foreign Tax Credit (FTC) lets you claim a credit for income taxes paid to another country, which helps prevent double taxation.
These benefits can significantly reduce your US tax liability, but you must still file a tax return to claim them. If you fail to file, you lose access to these benefits, and penalties for late filing or non-filing can apply.
The FBAR Requirement
In addition to filing a tax return, many Americans abroad must also file a Foreign Bank Account Report (FBAR). If the total value of your foreign financial accounts exceeded $10,000 at any time during the year, you are required to file the FBAR (FinCEN Form 114) electronically through the Treasury Department’s Financial Crimes Enforcement Network (FinCEN).
The penalties for failing to file the FBAR can be severe:
- Non-willful failure to file: Up to $10,000 per violation.
- Willful failure to file: The greater of $100,000 or 50% of the highest account balance, per year.
For example, if you held $50,000 across multiple foreign accounts and didn’t file your FBAR for three years, you could face penalties that far exceed the account balance itself if the IRS determined the failure was willful.
FATCA Reporting
In addition to the FBAR, certain expats must file Form 8938 (Statement of Specified Foreign Financial Assets) under FATCA (Foreign Account Tax Compliance Act). The reporting threshold starts at $200,000 for individuals living abroad (higher than for those living in the US). Penalties for failing to file Form 8938 start at $10,000, with additional fines if noncompliance continues.
Ignoring your US filing requirements while abroad can have long-term consequences. If you ever move back to the US, apply for a mortgage, inherit assets, or even renounce your US citizenship, the IRS will expect your filings to be up to date. Failure to file could mean not only penalties but also complications in your financial future.
What to Do If You Haven’t Filed
If you’ve missed filing deadlines, don’t panic—there are options:
- File as soon as possible: Even if you can’t pay right away, filing reduces the penalties significantly.
- Set up a payment plan: The IRS offers installment agreements if you can’t pay in full.
- Streamlined Filing Compliance Procedures: For Americans abroad who didn’t know they had to file, this program allows them to catch up on past returns without facing harsh penalties, provided they qualify.
FAQ: Penalties for Not Filing US Taxes
- Do I get penalized if I don’t owe taxes but file late?
No. If you don’t owe taxes, you won’t face failure-to-file or failure-to-pay penalties. However, you could lose refunds if you don’t file within three years. - What happens if I don’t file taxes in the US?
You may face penalties, interest, IRS collection actions, and in rare cases, criminal charges. - How much is the penalty for filing taxes late?
The penalty is 5% of unpaid taxes per month, up to 25%. After 60 days, a minimum penalty applies ($485 in 2024 or 100% of tax owed). - Do I still have to file US taxes if I live abroad?
Yes. US citizens and green card holders must file if their income is above the filing threshold, regardless of where they live. - What if I can’t pay my US taxes?
File your return anyway. The IRS allows payment plans. Not filing increases penalties significantly. - Can the IRS take my refund if I didn’t file?
Yes. If you don’t file within three years, you lose your right to claim any refund. - What is the penalty for not filing FBAR?
Up to $10,000 per non-willful violation, and the greater of $100,000 or 50% of the account balance per year for willful violations. - Is there a way to catch up without huge penalties if I live abroad?
Yes. The IRS offers the Streamlined Filing Compliance Procedures, which allow qualifying expats to catch up on missed filings without harsh penalties.
The penalty for not filing taxes in America is steep and grows the longer you wait. Between the failure-to-file penalty, failure-to-pay penalty, and interest, a small balance can quickly become a large debt.
Whether you live in the US or abroad, the best course of action is to file on time, even if you can’t pay in full. Filing keeps penalties lower, preserves refunds, and protects you from further IRS enforcement.
