Not filing a tax return generates more in penalties than not paying taxes. If you are required to file a tax return and you do not, the IRS charges 5% in penalties. Even if you owe no taxes, you still need to file your return. Also, regardless of whether you pay your entire tax bill, you should file your return and pay as much as you can.

Tax Return and Back Taxes

If you did not file your return because you could not pay your full tax bill, then you may incur a penalty for non-filing and also the penalty for non-payment of taxes (typically, the larger of the two penalties apply in such a case). To avoid the non-filing penalty of 5%, you should file your return even if you cannot afford to pay your entire tax bill.

Tax Return and Collection Action

The IRS can begin collection action even if you do not file your tax return. As a replacement for your return, the IRS files a Substitute for Return (SFR). Using information from third party sources such as employers and banks, the IRS estimates your tax bill. Based on this estimate, they file the SFR.

After the filing of an SFR, the IRS begins sending out notices to the taxpayer. If these notices go unanswered and no resolution effort is made, the IRS can move on to more aggressive collection efforts, such as a wage or bank levy.

To avoid paying more in penalties and to prevent collection action, it is critical to file your tax return on time. If for any reason you feel that you won’t be able to file your return by the due date, you should request an extension to get more time to file.

For help with any income tax question call one of our offices:

Plymouth 734.454.4100, Allen Park 313.388.7180,

Grayling 989.348.4055,  Livonia 734-462-6161,

Madison Heights 248.544.6160, Royal Oak 248.399.7331,

Saginaw 989.782.1985, or St. Clair Shores 313.371.6600