Filing taxes is an important civic duty in the United States. Each year, millions of Americans file their tax returns with the Internal Revenue Service (IRS) to report their income, calculate their tax liability, and settle any balance due. However, some people do not end up filing a tax return for a variety of reasons.
What is the tax filing requirement?
In general, the IRS requires all Americans to file a tax return if they meet certain income thresholds for the tax year. For the 2022 tax year, the income filing thresholds were as follows:
- Single filers under age 65 – $12,950
- Single filers over age 65 – $14,700
- Married filing jointly – $25,900
- Married filing separately – $5
- Head of household – $19,400
So anyone whose income exceeds these thresholds is required to file a tax return. The thresholds typically get adjusted each year for inflation.
How many people did not file a tax return?
Even with the legal requirement, millions of Americans do not end up filing tax returns each year. According to IRS estimates, around 17 million people did not file a tax return in 2019 despite being required to do so based on their income level. Here is a breakdown of the estimated non-filers for the 2019 tax year:
| Filing Status | Estimated Non-filers |
|---|---|
| Single | 11.4 million |
| Married Filing Jointly | 3.7 million |
| Head of Household | 1.9 million |
| Total | 17 million |
As the table shows, single filers account for the largest share of non-filers at 11.4 million. Married couples and heads of households make up the other 5.6 million non-filers.
What are the reasons people do not file taxes?
There are a variety of reasons why millions of Americans who meet income thresholds neglect to file annual tax returns. Some of the most common causes include:
- Lack of knowledge – Some people may not realize they are required to file if they fall below a certain income. There are also immigrants who may be unaware of US tax filing rules.
- Confusion – The tax code can be complex and some filers may find it too difficult to navigate. The confusion leads them to avoid filing altogether.
- Fear – People who have not filed for years may be afraid of the consequences and prefer to avoid filing out of fear.
- Inability to pay – Non-filers may worry that filing will reveal tax debt they cannot afford to pay. Some opt not to file for this reason.
- Protest – A small portion of non-filers refuse to file their taxes as a form of protest against taxation and the government.
While each non-filer will have their own specific reasons for not filing, lack of knowledge and confusion are likely the most common causes that lead people to avoid filing a tax return.
What happens if you do not file taxes?
There can be serious consequences for not filing your taxes if you meet the income filing requirements. Some potential penalties for non-filing include:
- Failure to file penalty – The IRS can charge a penalty of 5% per month of the unpaid taxes up to 25% of the total tax due. This penalty applies even if no tax is owed.
- Accuracy penalties – The IRS may determine taxes owed based on income data they have access to and charge penalties if payment is not made on time.
- Interest charges – Any taxes owed will accumulate interest until paid in full to the IRS.
- Wage garnishment – The IRS can legally obtain a portion of wages from the taxpayer’s employer to settle the tax debt.
- Tax lien – The IRS can place a lien on the non-filer’s property as collateral until the tax debt is resolved.
- Criminal prosecution – In extreme cases, non-filers may face criminal charges of tax evasion.
Not filing taxes is illegal if you meet income requirements and can seriously damage a person’s finances and credit if penalties and interest accumulate. It is best to file on time even if taxes cannot be paid in full.
How can non-filers get compliant with tax filing?
For Americans who have failed to file taxes for prior years, the best course is to take action to get compliant as soon as possible. Some options to consider include:
- File past returns – File accurate returns even if late for up to the last 6 years. The IRS can work out payment plans for any taxes owed.
- Claim a refund – For non-filers who would have received a refund, tax returns can still be filed to claim a refund for up to the last 3 years.
- Request penalty relief – Penalty waivers may be available for taxpayers with reasonable explanations for late filing or failure to file.
- Seek payment plans – The IRS offers payment plans and other options if taxes cannot be paid in full. These plans can avoid further penalties.
- Get tax pro help – Consulting a tax professional can help non-filers get compliant while minimizing penalties.
By taking proactive steps to resolve past non-compliance, taxpayers have an opportunity to avoid further consequences and get a fresh start going forward.
Conclusion
In summary, the IRS requires tax filing from all Americans who exceed set income thresholds each year. Despite this requirement, an estimated 17 million people failed to file a tax return in 2019. The reasons for not filing vary but often include lack of knowledge, fear, and inability to pay. There can be serious financial penalties for continuing non-compliance with tax filing obligations. Non-filers should take corrective action by filing past due returns, claiming eligible refunds, and utilizing IRS payment plans as needed. Addressing non-filing and unreported income in a timely manner is the best path toward resolving tax problems before they escalate.
