The short answer
Penalties and interest start adding up, and the IRS may eventually file a return for you that leaves out deductions and credits. After that, it can bill you and start collection. Filing, even late, stops the biggest penalty from growing.
Last reviewed: October 2026
What usually happens, in order
- Penalties start. The late-filing penalty is generally 5% of the unpaid tax per month, up to 25%. A minimum penalty applies once you're more than 60 days late.
- Letters arrive, such as a CP59 asking for the missing return.
- The IRS may file for you. A substitute for return usually leaves out deductions, credits and dependents, so the bill is often higher than it should be.
- Collection. Unpaid balances can lead to liens, levies on wages or bank accounts, and kept refunds.
Things people don't expect
- There's no time limit for the IRS to assess tax on a year that was never filed.
- If you were owed money for a year, you generally have three years to claim it. After that, it's gone.
- Lenders often ask for recent returns, so a missing year can hold up a mortgage.
The fix
File the missing years, starting with the most recent. Most people only need the last six. See How far back do I have to file? and Haven't Filed in Years?
Official source: IRS: Failure to file penalty.
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Disclaimer: This page is general information, not tax advice. Every situation is different, and tax rules change. Reading this page doesn't make you a client.