Haven’t Filed Taxes in 5 Years? Consequences & Options

Marc Boulanger • August 1, 2025

A man is holding a book that says `` what are the consequences ? ''

If you haven’t filed taxes in five years, you may be wondering what happens next. Whether it’s due to financial hardship, personal circumstances, or simply procrastination, not filing your tax returns for five years can lead to serious IRS consequences. The good news is that there are steps you can take to get back into compliance and reduce penalties.

In this guide, we’ll cover:

What to expect if you haven’t filed taxes in five years
IRS notices and enforcement actions
What happens if you haven’t filed business taxes
How the IRS files a Substitute for Return (SFR)
Filing your back taxes even if you’re missing documents
Why you should file as soon as possible—even if you can’t pay
How to get professional help to resolve your tax issues

What to Expect If You Haven’t Filed Taxes in Five Years

The longer you go without filing, the more serious the IRS consequences become. Here’s what you should expect:

1. Accruing Penalties & Interest

If you owe taxes, penalties and interest continue to accumulate for each year you haven't filed. These include:

Failure-to-file penalty: 5% per month (up to 25% of the total tax due)
Failure-to-pay penalty: 0.5% per month (up to 25%)
Interest on unpaid taxes: Accrues daily based on current IRS interest rates

2. IRS Collection Efforts Escalate

The IRS has a 10-year statute of limitations to collect unpaid taxes. The longer you go without filing, the more aggressive their collection efforts can become. This may include:

Tax liens: The IRS places a legal claim against your property
Wage garnishments: The IRS takes a portion of your paycheck
Bank levies: The IRS seizes money directly from your bank accounts
Seizure of assets: The IRS can take personal or business assets to satisfy the debt

3. Loss of Refunds

If you were due a refund in any of the last five years, you have only three years to claim it. After that, the IRS keeps the money. Since you haven’t filed for five years, any refunds for the first two years are gone forever.

4. IRS May File a Substitute for Return (SFR)

If you haven’t filed, the IRS can file a return on your behalf using their own estimated numbers. An SFR usually results in a higher tax bill because:

The IRS only includes known income (W-2s, 1099s, etc.)
No deductions, credits, or business expenses are included
The result is an inflated tax debt that is harder to reduce

IRS Notices for Unfiled Tax Returns

If you’ve ignored your tax filings for five years, you may have already received several IRS notices, including:

CP59 Notice: First notice informing you of unfiled returns
CP2566 Notice: IRS intent to file a Substitute for Return
CP504 Notice: Final warning before levy action
Notice of Federal Tax Lien: Public record showing you owe taxes
Intent to Levy Notice (LT11 or CP90): Final notice before the IRS seizes assets

If you’ve received any of these, it’s crucial to act before the IRS takes enforcement action.

What If You Haven’t Filed Business Taxes in Five Years?

For business owners, failing to file tax returns for five years is even more problematic. Consequences include:

Higher tax liability: The IRS assumes maximum profit with no deductions
Loss of deductions & credits: Business expenses and write-offs are forfeited
Payroll tax penalties: If you had employees and failed to file payroll taxes, penalties can be severe
Potential criminal charges: If the IRS believes there is willful tax evasion, legal consequences may follow

To resolve business tax issues, you should file as soon as possible and work with a tax professional to mitigate penalties.

How to File If You’re Missing Documents

If you haven’t filed in five years, you might not have all the necessary records. Here’s how to proceed:

1. Request IRS Transcripts

The IRS keeps records of income reported by employers, banks, and other entities. You can obtain transcripts of W-2s, 1099s, and other income forms through your IRS online account.

2. Contact Employers & Financial Institutions

If you’re missing documents, reach out to past employers, banks, and brokerage firms for copies.

3. Use Bank Statements & Accounting Records

Self-employed individuals and business owners can reconstruct income and expenses using bank statements and bookkeeping records.

4. File an Estimate If Necessary

If records are unavailable, file a reasonable estimate based on past earnings and expenses. The IRS allows amendments later if needed.

Why You Should File Taxes ASAP (Even If You Can’t Pay)

Even if you can’t afford to pay, filing is the best course of action. Here’s why:

1. Stops Failure-to-File Penalties

The failure-to-file penalty (5% per month) is much larger than the failure-to-pay penalty (0.5% per month). Filing stops this penalty from growing.

2. Qualify for a Payment Plan

The IRS offers several options:

Installment Agreements: Pay over time
Offer in Compromise (OIC): Settle for less than owed
Currently Not Collectible (CNC): Temporary relief if you can’t afford payments

3. Prevents IRS Enforcement Actions

Filing now can help avoid liens, levies, and garnishments before they escalate.

4. Keeps You in Good Standing for Loans & Passports

Not filing taxes can affect mortgage applications and may lead to passport revocation under the FAST Act.

5. Preserves Your Social Security & Retirement Benefits

If you are self-employed, not filing can reduce your future Social Security benefits, since income isn’t reported.

Take Action Now—Call Our Orange County Office for Expert Help

If you haven’t filed taxes in five years, don’t wait for the IRS to take action against you. At Boulanger CPA and Consulting, we specialize in helping individuals and businesses in Orange County resolve back taxes, minimize penalties, and get back into compliance with the IRS. Our Orange County CPA for back taxes can help.

📞 Call our Orange County office today at 657-218-5700 for a confidential consultation. Our experienced team has helped countless Orange County residents and business owners navigate IRS issues and regain financial stability.

🌟 If you are wondering "what the best tax relief services near me" are, we are located in the heart of Orange County, we understand local tax challenges and can provide the best solutions tailored to your needs. Take control of your tax situation today—call us now and let us help you get back on track!

Frequently Asked Questions

What happens if I haven’t filed taxes in 5 years?

The IRS may create substitute returns, assess balances without deductions, and pursue enforced collections.

Is it too late to fix it?

No. You can still file voluntarily and potentially qualify for penalty relief or settlement options like an Offer in Compromise.

What is a Substitute for Return (SFR)?

An SFR is when the IRS files for you using only W-2s, 1099s, and no deductions or exemptions. It usually results in a high balance owed.

Can I still claim refunds or credits?

You have a 3-year window to claim refunds. After that, they’re permanently lost—even if you qualify for one.

What enforcement actions can the IRS take?

The IRS can issue liens, levy your bank accounts, garnish wages, or assign your case to a Revenue Officer.

Can a local CPA help with both IRS and FTB filings?

Yes. An Orange County CPA can help you reconstruct records, file both IRS and California FTB returns, and build a resolution strategy.

📣 About the Author

Marc Boulanger, CPA is the founder of Boulanger CPA and Consulting PC, a boutique tax resolution firm based in Orange County, California and trusted by high-income individuals and business owners across Southern California.

He is the author of Defend What’s Yours: A California Taxpayer’s Guide to Beating the IRS and FTB at Their Own Game, available now on Amazon. The book offers a step-by-step plan for resolving IRS and FTB tax debt without losing your business, your home, or your peace of mind.

With over a decade of experience resolving high-stakes IRS and State tax matters, Marc brings strategic insight to complex cases involving wage garnishments, bank levies, unfiled returns, and six-figure tax debts. He is known for helping clients reduce or eliminate tax liabilities through expertly negotiated settlements and compliance plans.

Marc is a Certified Public Accountant licensed in California and Oklahoma and holds the designation of Certified Tax Representation Consultant. He is a member of the American Society of Tax Problem Solvers (ASTPS) — the national organization founded by the educators and practitioners who have trained thousands of CPAs, EAs, and tax attorneys in IRS representation strategy.

Every case is handled with discretion, proven methodology, and direct CPA-led representation — not call center scripts.

📍 Learn more at www.orangecounty.cpa or call (657) 218-5700.

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