With reports of IRS budget cuts and layoffs circulating, some taxpayers are questioning whether they should even bother filing a tax return this year. There’s a growing belief that the IRS is too underfunded and understaffed to chase down millions of unfiled returns.
However, skipping your tax return can lead to serious financial and legal consequences, including penalties, interest, and even wage garnishments.
In this guide, we’ll explore why not filing your taxes is a risky move, how IRS budget cuts impact enforcement, and what happens if you choose to ignore your tax obligations.
The IRS Is Facing Budget Cuts, But That Doesn’t Mean You’re Off the Hook
The IRS has been hit with multiple funding reductions, with another $20 billion in cuts recently enacted. These cuts have led to thousands of layoffs, including enforcement agents who typically audit high-income earners and corporations.
Additionally, outdated IRS technology and reduced staffing have already resulted in slower refund processing and customer service delays.
However, while audit rates may decline, the IRS still has automated systems to flag missing tax returns, unreported income, and unpaid taxes. The agency has increasingly relied on digital enforcement tools, such as matching third-party income reports from employers, banks, and investment firms against tax returns. So even if IRS staffing is stretched thin, skipping your tax return isn’t a foolproof way to avoid detection.
The Penalties for Not Filing Are Severe
Failing to file your tax return can trigger steep financial consequences, including:
• Failure-to-File Penalty – If you owe taxes, you’ll be hit with a penalty of 5% of the unpaid amount for each month your return is late, up to a maximum of 25%.
• Failure-to-Pay Penalty – If you don’t pay what you owe, the IRS tacks on an additional 0.5% monthly penalty, which can also add up to 25%.
• Accruing Interest – On top of penalties, the IRS charges interest on unpaid taxes, which compounds daily until the debt is paid in full.
Over time, these penalties and interest can double or even triple the amount you originally owed.
Skipping a Tax Return Could Cost You Future Refunds
Even if you expect a refund, skipping your tax return isn’t a good strategy. The IRS holds onto unclaimed refunds for three years, but after that, the money goes to the U.S. Treasury.
Worse, if you owe back taxes, any future tax refunds will be automatically seized by the IRS to cover your debt. If you’re relying on a tax refund to pay bills or cover expenses, skipping your tax return could result in delayed or forfeited payments.
Wage Garnishments and Bank Levies Are a Real Threat
Many people assume that if they ignore their tax obligations, the IRS will simply move on. In reality, the agency has powerful collection tools, including:
• Wage Garnishments – The IRS can take a portion of your paycheck until your tax debt is settled.
• Bank Levies – The agency can freeze and seize funds from your bank account.
• Liens Against Property – If you owe significant back taxes, the IRS can place a lien on your home, vehicle, or other assets, making it difficult to sell or refinance.
Even with fewer enforcement agents, these collection measures are largely automated and don’t require human audits. The IRS has continued to collect billions in unpaid taxes each year despite previous staffing shortages ( ).
The IRS Can Come After You Indefinitely
One of the biggest myths about skipping a tax return is that the IRS has a time limit to collect unpaid taxes. While the IRS generally has 10 years to collect tax debts after an assessment, that clock doesn’t start if you never file a return.
This means the agency can come after you at any time in the future, with penalties and interest continuing to accrue indefinitely.
How to Stay on the IRS’s Good Side
Instead of skipping your tax return, here are some proactive steps to take if you’re worried about filing:
• File Even If You Can’t Pay – The penalties for failing to file are much steeper than the penalties for failing to pay. If you owe money but can’t afford to pay, file your return anyway to minimize additional penalties.
• Set Up a Payment Plan – The IRS offers installment plans that allow you to pay your tax debt over time. This can help prevent aggressive collection actions like wage garnishments and bank levies.
• Seek Professional Help – If you’re dealing with a complex tax situation or large tax debt, consulting a tax professional or attorney can help you navigate the process and negotiate with the IRS
Final Thoughts: Filing Your Taxes Is Always the Right Move
While IRS budget cuts may reduce some enforcement activities, skipping your tax return is still a high-risk strategy that can lead to financial and legal trouble. Interest, penalties, and collection actions can make your tax debt far worse over time, and the IRS has powerful tools to ensure compliance—even with a reduced workforce.
Instead of taking the gamble, file your tax return on time and explore payment options if you owe money. The sooner you address your tax obligations, the better off you’ll be.
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