Apr 14, 2025
Joy, 54, has been happily married for more than two decades. Together, she and her husband make an estimated $170,000 a year. They don’t have any debt, aside from their mortgage, and they’ve been consistently putting money aside for retirement.
But Joy has a secret that’s eating her up inside: she hasn’t filed her family’s taxes for the past five years. And her husband has no idea.
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Now, she’s wondering if there’s anything she can do to get their finances back on track or if the damage is already done.
Getting back on track with your taxes
Joy never intended to get behind with paying taxes. She’s self-employed, but a major health scare caused her to become anxious and depressed, and filing taxes simply fell off her radar.
She wouldn’t be the only one to go through something like this. A survey by IPX1031 found that 31% of American taxpayers procrastinate when it comes to filing taxes. The top reasons? Because it’s too complicated or stressful.
Joy might want to start by opening up to her husband about what’s going on. Keeping financial secrets from a spouse, whether it’s a secret savings account or secret debt, is a form of financial infidelity — and that can take a toll on your relationship.
Once they’re on the same page, together they can take immediate steps to rectify the situation — especially if they owe back taxes to the Internal Revenue Service (IRS). If they’re eligible for a refund, typically they have three years from the due date of their return to claim it.
Joy should still file their past-due returns, even if they owe back taxes and can’t afford to pay them off all at once. They can request an extension of 60 to 120 days or work out an installment plan to pay them off over time. Those who meet certain financial requirements may be eligible for an offer in compromise, which allows you to settle your tax debt for less than the full amount owed.
Joy and her husband may also want to consult an accountant who has experience dealing with the IRS to help them move forward.
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How failing to file your taxes can cost you
The longer they wait to deal with their unpaid taxes, the more it could cost them. Interest accrues on the tax amount owed — and the current quarterly rate is 7% (as of the second quarter of 2025).
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Plus, for every month you’re late to file your taxes, you’ll rack up a penalty equal to 5% of your unpaid tax amount, up to a total of 25%. There’s also a 0.5% monthly failure-to-pay penalty, which goes up to 25% of the amount owed.
For those who fail to file and fail to pay they will pay a combined monthly penalty of 5% (the failure-to-file penalty drops to 4.5%) for up to five months. Afterward, if the tax remains unpaid, the 0.5% failure-to-pay penalty continues to accrue until it hits 25%. The maximum total penalty for failing to file and pay is 47.5% of the tax owed.
In addition, the IRS says: “If your return was over 60 days late, the minimum failure-to-file penalty is the smaller of $510 (for tax returns required to be filed in 2025) or 100% of the tax required to be shown on the return.”
Failure to pay back taxes could result in debt collection actions (such as wages being garnished). Intentionally committing tax evasion or fraud can result in criminal charges, which is punishable by jail time and even a huge fine. But Joy’s actions are likely to be deemed an honest mistake.
Not filing could also impact your retirement, since Social Security benefits are based on the earnings you report. If you’re employed, the Social Security Administration (SSA) automatically receives earnings information from form W-2. But if you’re self-employed, like Joy, and you don’t file your return, then you could miss out on credits toward Social Security retirement or disability benefits.
By being proactive and working with the IRS to resolve the issue, it’s unlikely Joy and her husband will have to pay more than a pumped up tax bill.
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Vawn Himmelsbach is a veteran journalist who has been covering tech, business, finance and travel for the past three decades. Her work has been featured in publications such as The Globe and Mail, Toronto Star, National Post, Metro News, Canadian Geographic, Zoomer, CAA Magazine, Travelweek, Explore Magazine, Flare and Consumer Reports, to name a few.
