Skipping your tax return due to IRS cutbacks? Here’s why that could cost you big time

As the IRS faces budget cuts and layoffs, some taxpayers may be wondering if they should bother filing their tax returns this year. But skipping your return could be a costly mistake, experts warn. Despite IRS challenges, penalties for non-filing remain severe, and ignoring them can lead to hefty fines or legal trouble.

Will IRS cutbacks mean fewer tax return enforcements?

As of February 14, the IRS had received about 5% fewer individual returns compared to the same period last year, according to the agency’s latest filing statistics. Some taxpayers may believe the IRS’s reduced workforce means less enforcement, but experts say that assumption is risky.

Josh Youngblood, an enrolled agent and owner of The Youngblood Group, a Dallas-based tax firm, said some of his clients have asked if filing is necessary this year. “I’m concerned we’re going to see more of this,” Youngblood said, pointing to IRS layoffs and discussions about eliminating the agency altogether.


The uncertainty follows mass layoffs at the IRS, prompted by federal spending cuts from Elon Musk’s Department of Government Efficiency (DOGE). Additionally, Commerce Secretary Howard Lutnick told Fox News that President Donald Trump is considering abolishing the IRS and replacing it with tariffs. While these political shifts are making headlines, taxpayers should not assume the IRS will stop pursuing non-filers.

What happens if you don’t file your tax return?

Failing to file your tax return comes with serious consequences. The IRS imposes a “failure to file” penalty, which is 5% of the unpaid tax per month, up to a maximum of 25%. This penalty is significantly higher than the “failure to pay” penalty, which is only 0.5% per month.

According to Robert Nassau, a law professor at Syracuse University and director of the school’s low-income tax clinic, some taxpayers avoid filing because they think, “The IRS is never going to find me,” or they feel overwhelmed by potential tax debt. However, ignoring tax obligations only worsens financial consequences over time.

Are ‘tax protestors’ right about income taxes?

There is a small but vocal group of individuals who claim that federal income taxes are unconstitutional and that they are not legally required to pay. However, courts have consistently rejected these arguments, and the IRS penalizes those who file “frivolous tax returns.”

Certified public accountant Mark Kohler explains, “There’s a whole laundry list of weird arguments that never work.”

For instance, in United States v. Sloan, a circuit judge wrote, “Like moths to a flame, some people find themselves irresistibly drawn to the tax protester movement’s illusory claim that there is no legal requirement to pay federal income tax. And, like moths, these people sometimes get burned.”

If you file a return without sufficient information to determine your tax liability, you could face a $5,000 civil penalty for submitting a frivolous tax return under the Internal Revenue Code.

How can you avoid IRS penalties and interest?

If you owe taxes but can’t afford to pay, the best course of action is to file your return on time and set up a payment plan. Nassau emphasizes that filing is always cheaper than not filing. Even if you can’t pay the full amount, the IRS offers installment agreements to help taxpayers manage their obligations.

Taxpayers can also request an extension, which gives them until October 15 to file. However, it’s important to note that an extension only applies to filing, not to paying. Interest and penalties still accrue on unpaid taxes after the April deadline.

Should you still file your tax return amid IRS uncertainty?

Despite political discussions about IRS cutbacks and possible elimination, taxpayers should not assume that enforcement will disappear. The IRS continues to track non-filers, issue penalties, and take legal action when necessary.

The safest approach is to file your return on time, even if you can’t pay the full amount. With penalties for non-filing significantly higher than those for non-payment, avoiding the process altogether can lead to bigger financial troubles down the road.

FAQs:

What happens if I don’t file my tax return?
You could face a 5% monthly penalty on unpaid taxes, up to 25%.

Are IRS cutbacks reducing tax enforcement?
No, penalties and legal actions for non-filers remain in place.