I haven’t filed a tax return in a long time – maybe four or five years. How bad is that?
It depends on your situation. Let’s start with the worst-case scenario.
If you owed taxes for the years you haven’t filed, the IRS has not forgotten. For each return that is more than 60 days past its due date, they will assess a $135 minimum failure to file penalty. The failure to file penalty, also known as the delinquency penalty, runs at a severe rate of 5% up to a maximum rate of 25% per month (or partial month) of lateness. You can read more on penalties here.
If you were due a refund and hadn’t filed, there’s good news and some bad news.
Bad news: for any year more than three years overdue, you cannot file a tax return and claim the refund. For example, the last day to file a tax return for 2012 is April 18, 2016. That’s because the original due date for the 2012 return was April 2013 – or three years ago.
So if you did not file in 2011 or 2010, you have forfeited those refunds to the government. There’s no getting them back now.
However, if you have not yet filed a return for 2012, 2013 or 2014, you can still file and receive any refund due. You will need to file the returns on paper, which means the processing takes a little longer, but you can get that refund and not pay any penalties.