Often no returns had been filed for the taxpayer's business, either. Once taxpayers fail to file for one year, fear keeps them out of the system. Interest and penalties accrue on any amount the taxpayer may owe. Late filing penalty is five percent per month of the balance due up to 25 percent. Failure to pay penalty is one-half of one percent per month up to 25 percent.
Interest is also due on the amount owed.
Refunds must be claimed within three years or they are lost. Refund returns must be filed within 3 years from the due date of the return. For example, the refund period for 1988 returns expired last April and it will run out for 1989 returns unless the taxpayer files by April 15, 1993. Loss of other benefits such as tax credits or Social Security payments. Self-employed individuals who do not file returns may lose credits toward their social security coverage in retirement or for disability.