I Haven’t Filed Taxes in 10 Years. What Do I Do?

Paying taxes is a legal responsibility for citizens, and taxpayers should be aware of possible consequences of not filing. However, many people go as long as ten years without filing their taxes, often without calculating the penalties and interest the IRS may impose on unfiled returns.

Are you wondering, “I haven’t filed taxes in 10 years. What do I do?” Then, you are in the right place. This simplified guide will help you through how to file back taxes, even if you have missed multiple years.

Why Do Not People File Their Taxes?

Procrastination: Many taxpayers believe they have more time than they actually do, or they might start the process only to miss the deadline by not completing it.

Lack of knowledge: Some taxpayers do not have a grasp of tax laws. It may seem complicated.

Financial hardship: Those facing financial hardship may not have the funds to pay for professional tax help.

Personal problems: Illness, family emergencies, or other life events may take precedence, and tax preparation may fall to the bottom of the to-do list.

After a few years, they do not know where to start: Sometimes, taxpayers may feel overwhelmed and unsure of where to start, especially if they have missed filing for multiple years.

Poor recordkeeping or no recordkeeping at all: Poor recordkeeping can make it difficult to complete tax returns correctly.

Consequences of Not Filing Taxes

The IRS charges a 5% monthly penalty for late tax returns under the Failure to File Penalty, which can accumulate up to 25% of your unpaid taxes. 

If taxes are owed and remain unpaid, an additional Failure to Pay Penalty of 0.5% of the unpaid amount is added each month, up to a maximum of 25% of the unpaid amount. Interest on unpaid taxes and accrued penalties is also applied daily. You can check the determination of the rate of interest document on the IRS.

Beyond these penalties, unpaid tax debt can also make it harder to secure loans or mortgages harder. Lenders may view outstanding tax obligations as a risk. As a result, this situation may lead to loan denials or higher interest rates.

Many people worry about jail time for not filing taxes. But under the 26 U.S. Code § 7201 is typically reserved for tax evasion, where taxpayers willfully attempt to evade paying taxes. In most cases, failure to file results in financial penalties rather than criminal charges. However, repeated non-filing or deliberate avoidance can lead to legal action by the IRS.

Penalties & Interest Calculation Examples

Failing to file and pay cause tax debt to grow rapidly due to penalties and interest.

Example 1: Failure to File & Failure to Pay Penalties

• Tax Owed: $10,000
• Failure to File Penalty: 5% per month (up to 25%) → $2,500 max
• Failure to Pay Penalty: 0.5% per month (up to 25%) → $1,250 max
• Total Penalties After 5 Months: $2,750
  

Example 2: Interest on Unpaid Taxes

• Tax Owed: $10,000
• IRS Interest Rate: 7% annually (compounded daily, rate as of 2025)
• Interest After One Year: $725
• Total Amount Owed After One Year (with penalties & interest): $10,725
  

Example 3: Long-Term Non-Filing (5 Years of Delinquency)

• Tax Owed: $10,000
• Failure to File & Pay Penalties: $5,000
• Interest Over 5 Years (compounded daily at 8% annually): $5,025
• Potential IRS Collection Actions: Liens, wage garnishments, or asset seizures
• Total Debt After 5 Years: $20,025

Note: The IRS updates interest rates quarterly. Short-term unpaid taxes (Example 2) use the current 7% rate, while long-term unpaid balances (Example 3) assume a possible increase to 8% based on historical trends.

As seen in these examples, a $10,000 tax debt can grow to over $20,000 in just five years due to penalties and interest. Taking action early (such as filing past returns and setting up a payment plan) can prevent escalating costs and enforcement actions.

While these consequences apply to individuals, business owners face additional risks if they fail to file taxes. Business tax obligations have stricter penalties and potential legal actions that can impact both the company and its owners.

What Happens If You Do Not File Taxes for Your Business?

Individuals and businesses must report all their taxable income. Filing taxes not only ensures you pay your tax debt but also protects your refunds and deductions. With this way, you can reduce your overall tax burden and prevent further debt accumulation.

The consequences are different for each company. However, some general implications are:

• Fines and interest
• Loss of deductions and credits
• General tax liens
• Substitute for Return (SFR)
• Revocation of corporate status

What is the Impact of Non-Filing on Social Security Benefits?

Not filing taxes can reduce Social Security benefits, especially for self-employed people, because unreported income lowers future payments. Retirees who owe taxes might have their payments delayed or withheld, and the IRS can take Social Security benefits to recover unpaid taxes. 

If you haven’t filed taxes in 2 years:

Even a two-year delay in filing can significantly increase the total amount owed. Although initial penalties may seem manageable, they can add up quickly, reaching up to 25% of your unpaid tax liability if left unaddressed.

If you haven’t filed taxes in 3 years:

Taxpayers who are due a refund want to file as quickly as possible because the IRS only allows you to claim a refund within a three-year window. After three years, any unclaimed refunds are permanently forfeited. For taxpayers who owe taxes, penalties, and interest continue to accrue, adding to your overall tax debt and making it increasingly costly to resolve.

If you haven’t filed taxes in 5 years:

By this point, the IRS may take aggressive collection actions, including liens, levies, and wage garnishment. The IRS may also file a Substitute for Return (SFR) on your behalf, leading to a higher tax liability due to limited deductions. Taking proactive steps can help prevent further financial damage.

State-Specific Tax Laws & Collection Rules: 

• In California, the Franchise Tax Board (FTB) enforces a 20-year collection period for unpaid taxes, with possible extensions under specific circumstances.
• In New York, The Department of Taxation & Finance enforces a 20-year limit on tax liability collections. This period is not extended by payments or written acknowledgments, but can be extended through mutual written consent.
• In Texas, there is no state income tax, but the Comptroller’s Office strictly collects other taxes, including business and sales taxes. 
• In Massachusetts, the Department of Revenue (DOR) publicly lists taxpayers with significant delinquencies, potentially impacting their financial standing.

Some states pursue debts longer than the IRS, and tax collection tactics vary widely. Research your state’s tax policies to avoid unexpected penalties. At Precision Tax Relief, we provide information for all 50 states. Contact us for your free initial consultation.

If you haven’t filed taxes in 10 years:

At this stage, the IRS will likely escalate enforcement actions if no effort has been made to resolve unpaid taxes. This includes liens, levies, and wage garnishments.

Additionally, if the 10-year statute of limitations is nearing, strategic planning may help minimize what you owe. (See “Tax Forgiveness & Statute of Limitations on IRS Debt” for details.)

While the IRS prioritizes financial penalties over jail time, deliberate tax evasion can still result in prosecution.

Criminal Consequences for Tax Evasion

• Fraudulent Failure to File (IRC 7203): Not filing a tax return on purpose (IRC §7203) is a crime that can lead to up to one year in jail for each missing return, plus a fine of up to $25,000 ($100,000 for companies). If someone tries to cheat on their taxes, it could turn into a more serious crime (IRC §7201) with up to five years in prison.
• Higher audit risk: The IRS is more likely to audit and investigate people who don’t file tax returns for many years, especially if they owe large amounts.
• Statutory Notice & Tax Court: If the IRS believes you owe more taxes, they may send a Notice of Deficiency, giving you 90 days to challenge it in US Tax Court before the debt becomes final.
• Willful Tax Evasion (IRC 7201): Deliberate tax evasion (IRC §7201) is a serious crime that can lead to up to five years in prison and fines of $250,000 for individuals or $500,000 for companies.

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How an SFR Affects You

If you do not file a tax return, the IRS may create a Substitute for Return (SFR) using only reported income sources like W-2s and 1099s. These returns do not include deductions or credits, leading to higher tax bills.

• No deductions for dependents, mortgage interest, or business expenses.
• It can trigger levies, wage garnishments, and liens.
• You may still claim refunds or tax credits by filing your own return, but there is a limited time frame to do so.

Filing your own return as soon as possible is the best way to correct an SFR and minimize penalties. However, once you have faced it, here is how to overcome it.

1. Submitting an accurate return replaces the IRS’s version.
2. Get an IRS Wage and Income Transcript to verify what they used.
3. Filing may reduce penalties, and you may qualify for a payment plan.
4. A tax expert can ensure you claim all eligible deductions.

IRS Fresh Start Program

The IRS Fresh Start Program helps taxpayers manage back taxes and avoid severe penalties.

1. Installment Agreements: Pay taxes in monthly payments to avoid aggressive collection.
2. Offer in Compromise (OIC): Settle tax debt for less than owed if you qualify.
3. Penalty relief: The IRS may waive penalties for first-time offenders or financial hardship.
4. Lien withdrawal: Qualifying taxpayers with direct debit installment plans may get liens removed.

A tax professional can guide you through eligibility and application

IRS Notices and How to Respond

CP59 (First Notice for Non-Filing): Review your records and respond promptly with a completed tax return to avoid further penalties.

CP256 (Installment Payment Reminder): Ensure timely payment of your tax installment under IRC Section 965 to avoid penalties and additional interest.

Statutory Notice of Deficiency: This is your final chance to contest the IRS’s calculations. Consider filing a petition with the Tax Court if needed.

“Filing back taxes is not just a financial responsibility but a legal obligation under federal law,” says Gene Haag, Enrolled Agent (EA) and Managing Partner at Precision Tax Relief. “The IRS has the authority to enforce compliance through penalties, wage garnishments, and, in extreme cases, asset seizures. However, taxpayers have the right to dispute assessments, negotiate settlements, and use legal protections to minimize the impact of non-compliance. Understanding your rights and obligations is key to managing the process effectively.”

CP515 (Request for Tax Return): File the missing return as soon as possible to avoid further action from the IRS. If you do not respond, the IRS may file a SRF on your behalf.

CP504 (Final Notice Before Levy): Resolve your tax debt or request a Collection Due Process hearing to stop the IRS from seizing your assets.

Negotiate the Tax Bill

Unpaid taxes can lead to accumulating penalties, and in extreme cases, prosecution, but there is always an opportunity to negotiate with the IRS. 

IRS Payment Options

1. Installment Agreements (IA): Pay your tax debt in fixed monthly payments. Options include short-term (up to 180 days) and long-term (over 180 days) plans.
2. Partial Payment Installment Agreement (PPIA): Pay a reduced amount over time based on your financial situation.
3. Offer in Compromise (OIC): Settle your tax debt for less than you owe if you prove financial hardship.
4. Currently Not Collectible (CNC) Status: If you are unable to pay, the IRS may pause collection efforts, though interest and penalties continue.
5. Penalty Abatement Requests: Request a reduction or removal of penalties due to hardship, such as illness or natural disasters.
6. Taxpayer Advocate Assistance: If facing extreme hardship, the Taxpayer Advocate Service (TAS) can help negotiate with the IRS on your behalf.

John T. owed $172,441 in back taxes, facing years of financial strain and escalating penalties. After struggling to find reliable help, he contacted us. Our team carefully analyzed his financial situation and guided him through an Offer in Compromise. The IRS accepted his offer, and his tax debt was settled for just $100. John now enjoys financial freedom and peace of mind, relieved from the burden of his past debts. You can read our other client successes.

We understand how overwhelming unpaid taxes can feel. The anxiety of receiving IRS notices or worrying about wage garnishment can take a toll on your well-being. Let our experienced team help you navigate the process step-by-step, reducing both your financial and emotional burden.

How to File Back Taxes in 5 Steps

Are you asking yourself, “How do I deal with the IRS for back taxes?” Stop panicking, just keep reading.

1. Gather Necessary Documents

   Foremost, collect all relevant documentation for each tax year.

   • W-2s or 1099s for income received.
   • Bank statements, receipts, and invoices for deductible expenses.
   • Records of tax credits or deductions for which you’re eligible.
   • Any real estate, mortgage statements, and property tax documents.
   • Statements of investment accounts, including capital gains and losses.
   • Request a Wage and Income Transcript via the IRS website or Form 4506-T to reconstruct your income history if needed.

     For multiple unfiled years, ensure you separate documentation for each tax year to avoid confusion. Besides, to reduce audit risks, double-check income records and prepare deductions based on IRS guidelines. Otherwise, large or unusual deductions without proper documentation may raise red flags.
     

     Missing Tax Documents? 

     No need to worry, you can get them from the IRS or other sources.

     1. Request wage and income transcripts online or by mail from the IRS to access W-2s, 1099s, and other reported income documents.
     1. Ask former employers, clients, or financial institutions for copies of missing tax forms.
     2. Use bank records to estimate income and deductions if official forms are unavailable.
     3. IRS Form 4506-T is used to request tax return transcripts (summary records). To obtain a full copy of a past tax return, use IRS Form 4506 instead

     Getting your tax records early makes filing back taxes easier and prevents costly mistakes.

2. Prepare Your Tax Returns

   Use the information you have collected to calculate how much you owe in taxes. Carefully fill out and complete your tax return(s), including every source of income, and claim every available deduction.

   • If you are filling by hand, printable prior-year tax return forms are available.
   • You can use tax preparation software to file back taxes.
   • Get help with tax returns from a tax professional.
     

   New to filing back taxes? First, determine which tax years you need to file, as the IRS typically requires returns for the past six years. If this process seems overwhelming, consider getting help from our team.

   When filing multiple years, file the oldest returns first and avoid drastic changes in income or deductions unless properly documented. Consistency across years can reduce audit risk.

3. Sign and Submit Your Return

   instructions. The most recent tax return may be eligible for e-filing, but most delinquent returns must be printed and mailed to the IRS. When mailing returns, it is important that each return is mailed separately.

   Submitting all returns together, fully completed and accurate, helps ensure smooth processing and reduces the likelihood of IRS inquiries

   What is a deficiency assessment?

   After a tax return is filed, the IRS may review it and find discrepancies. A deficiency is the difference between the tax amount reported by taxpayers and what the IRS determines is actually owed. The IRS notifies taxpayers of this deficiency through a deficiency letter.

4. Consider Professional Help

   Filing back taxes can be daunting, but a qualified tax professional can assist you in several ways:

   • Navigate through the tax return process.
   • Track down tax deductions and credits you may have missed.
   • Negotiate with the IRS to minimize penalties and interest.
   • Establish a payment plan or settlement offer, if necessary.

     Tax professionals can help ensure compliance, reduce errors, and lower the risk of an audit.

5. Address Any Outstanding Tax Debts

   The IRS offers various solutions for taxpayers:

   • Paying the full amount owed, if possible.
   • Paying the debt in monthly installments.
   • Set up an online IRS account to manage monthly payments tailored to your financial situation.
   • Asking for a settlement offer to pay the debt for less than the full amount owed.
   • Sentence reduction or other relief programs.

Staying in contact with the IRS and responding promptly to notices can help prevent further scrutiny or enforcement actions.

Avoid penalties, protect your assets, and regain peace of mind with our simple 4-step guide:

IRS Voluntary Disclosure Program 

If you have unreported income and want to come forward before the IRS contacts you, the IRS Voluntary Disclosure Program offers a legal way to resolve your tax issues. The program excludes income from illegal activities.

The IRS Voluntary Disclosure Practice offers a pathway for taxpayers with unreported income to come forward and resolve their tax issues.

• The IRS starts a civil or criminal investigation or notifies the taxpayer of one.
• Timeliness and full cooperation are essential components of a valid voluntary disclosure.
• The IRS gets information from a third party (like an informant or media) about the taxpayer’s noncompliance.
• The IRS begins a related investigation or obtains related evidence through criminal enforcement actions.

Initiating a voluntary disclosure now requires submitting Form 14457 to the IRS Criminal Investigation unit via fax at 844-253-5613.

Tax Forgiveness & Statute of Limitations on IRS Debt

The IRS has 10 years from the time they decide you owe taxes to collect the money. After this time, called the Collection Statute Expiration Date (CSED), the IRS can no longer legally collect the debt, and it is erased.

How Does the Statute of Limitations Work?

The 10-year countdown starts when the IRS decides you owe taxes, not when your tax return was due. But some actions can pause or extend this time, such as:

• Filing for bankruptcy (Suspends the collection period during the bankruptcy case and adds an additional six months)
• Requesting an Offer in Compromise (Suspends the collection period while the OIC is pending, plus 30 days after rejection)
• Leaving the country for more than 6 months (Suspends the collection period during the absence)
• Entering into an installment agreement (Suspends the collection period while the installment agreement request is pending and for 30 days after rejection or termination)
  

If your tax debt is approaching the 10-year mark, consulting a tax professional can help assess whether waiting out the statute is a viable option. However, be cautious, as certain actions, like entering a partial payment installment agreement, may extend the collection period instead of reducing what you owe.

Does the IRS Automatically Forgive Debt After 10 Years?

The IRS generally stops collection efforts after 10 years, but this is not automatic forgiveness. The debt remains, but the IRS is legally barred from collecting it unless the statute is extended. Certain actions can pause or extend the 10-year period. Monitoring your statute expiration date and avoiding unnecessary extensions is crucial.

Know your rights when dealing with the IRS

1. Right to Appeal: You can dispute IRS decisions through the Office of Appeals or US Tax Court. Submit a formal appeal request within the given timeframe.
2. Right to Representation: You can hire a tax professional, CPA, or attorney to deal with the IRS on your behalf. Consult a trusted tax attorney. 
3. Right to Dispute Penalties: You may request penalty relief for reasonable causes like medical emergencies or financial hardship.
4. Protection from Unfair Collections: The IRS must follow legal procedures before issuing levies, garnishments, or liens. You can request a Collection Due Process Hearing to challenge these actions.
5. Right to a Payment Plan: If you can’t pay in full, you can request an installment agreement or other payment options.
6. Right to Be Informed: The IRS must provide clear explanations of tax laws and actions taken against you.
7. Right to Confidentiality: Your tax information is protected by law and cannot be shared without your consent.

Each passing year increases the penalties, compounding the total owed. However, with a well-planned approach, these penalties can be minimized. Consulting with an expert can make navigating tax laws more manageable and help reduce high tax penalties.

Act now to prevent wage garnishment.