Penalties

• When you do not file your taxes on time, the IRS will charge late-filing penalties. If you do not file your taxes, the IRS will impose a 5 percent penalty on the amount of tax that you owe per month. This penalty can continue to accrue for a maximum of 5 months. Besides the penalty for late filing, you also can be imposed a 0.5 percent penalty for paying your taxes late.
  
  

Interest

• Besides the money that you have to pay in penalties to the IRS, you also can be charged interest. This interest charge will be based on the amount that you owe when you file your tax return. The interest rate can fluctuate and is based on a financial index that the IRS uses. This rate could be somewhere between 4 and 7 percent, depending on the market interest rates at the time. This adds to the total amount of money that you have to pay the IRS.
  
  

Substitute Return

• After a certain amount of time of not filing your taxes, the IRS will file a substitute tax return for you. The substitute tax return is based off of information that the IRS has collected on you from other sources. For example, the W-2's or 1099's that are sent to the IRS from your employers provide income information about you. When the IRS files a tax return for you, you will not get any of the itemized deductions that you could have received.
  
  

Collection Efforts

• If you continue to avoid filing your taxes and paying them, the IRS can take several actions to try to get money back from you. For instance, the IRS could place a levy on your bank account and take money directly from you. It could also levy your personal assets like your house or car. In some cases, the IRS will garnish your wages if you do not have assets that can be taken and sold.