Will I be charged a late penalty for not filing income taxes?

For those who fail to file a tax return by April 15 of each year, but are due a tax refund from the Internal Revenue Service (IRS), there is no penalty for failing to file their tax return. The failure to file penalty applies only to those individuals who owe tax and do not file a tax return. Even though you may not be charged a late penalty for failing to file because you are due a tax refund, there are other consequences for failing to file a tax return on time.

If you are due a tax refund and fail to file your tax return within three years of the original due date, you lose the right to your tax refund. Assume that Mary was a due a tax refund in 2001, but failed to file a return. If Mary decides to file a return in 2005, she has lost the right to claim her tax refund because she did not file within 3 years of the original due date. If you are eligible to claim certain tax credits, such as the earned income credit, and fail to file a tax return within 3 years of the original due, you will lose your ability to claim those credits. Self-employed individuals who fail to file within 3 years of the original due date will not receive credits towards Social Security retirement and disability benefits.

Another consequence of failing to file on time is that you cannot file electronically. Late returns must be filed on paper and mailed to the IRS, but you can still use tax software to prepare your tax return. It is best to file a tax return as soon as possible because the IRS will file a substitute tax return for you, but this return will be based on the limited information the IRS has and may not include any additional exemptions or expenses you may be entitled to, which could cause the IRS to miscalculate your real tax liability. If the IRS has prepared a substitute return and then you file a return, the IRS will make corrections based on the information you provide and adjust your tax liability. If you need help with filing your tax return and have low to moderate income, you can contact the Volunteer Income Tax Assistance (VITA) program for free assistance.