Most people who have not filed in years did not set out to break the law. A business had a hard year and the owner could not face a return showing tax they could not pay. A spouse who handled the filings passed away or left. A single missed year turned into two, then five, and the longer it went the more frightening it felt to come forward. If any of that sounds familiar, you are in a far more common and far more solvable situation than you probably believe.

The most important thing to understand at the start is this: not filing is almost always worse than filing a return you cannot fully pay. The penalty for not filing is much larger than the penalty for not paying, the unfiled year stays open forever, and the problem only grows while you wait. The good news is that there is a well-worn path back into compliance, and for the overwhelming majority of people it does not involve criminal charges. It involves filing the right returns and then resolving whatever balance is left in a manageable way.

This guide is written for Maryland and Pennsylvania individuals and business owners. It walks through what the IRS does when you do not file, how far back you actually have to go, what the penalties and interest look like, how Maryland and Pennsylvania handle back taxes, and the practical steps to get current. It is general information, not legal advice, but it should take some of the fear out of a problem that feels much bigger in the dark than it does once you have a plan.

You may have heard that the IRS only has three years to come after a return. That is true, but it contains a trap. The three-year period in Internal Revenue Code Section 6501(a) is the time the IRS has to assess additional tax, and that clock does not start until a return is actually filed. For a year you never filed, the clock never starts. Under Section 6501(c)(3), the IRS can assess tax for an unfiled year at any time, with no deadline at all.

In other words, filing a return is what eventually closes the door on a tax year. Not filing keeps that door open forever. A return you should have filed eight or ten years ago is just as collectible today as it was then, plus penalties and interest that have been compounding the entire time.

Maryland and Pennsylvania follow the same logic

This is not just a federal rule. Under Maryland Tax-General Section 13-1101, the Comptroller normally must assess income tax within three years of the later of the filing date or the due date, but the statute expressly allows assessment at any time when a required return was not filed, when an incomplete return was filed, or when there was a willful attempt to evade. Pennsylvania’s general assessment period is also three years measured from a filed return, which means it offers no protection for a year you never filed.

When you stop filing, the IRS does not simply forget about you. It receives copies of your W-2s, 1099s, and other information returns from employers, banks, brokerages, and clients. If enough income shows up and no return arrives, the IRS can eventually prepare its own return for you. This is called a Substitute for Return, and the authority for it is Internal Revenue Code Section 6020(b).

A Substitute for Return is built to the government’s advantage, not yours. It generally uses the least favorable filing status, allows only the standard deduction, claims no dependents, and gives you none of the business expenses, cost basis, itemized deductions, or credits you would normally take. For a self-employed person, that is especially punishing, because the IRS counts the gross amounts reported on 1099s as income while ignoring every legitimate expense that would reduce it. The result is almost always a balance that is far higher than what you actually owe.

The IRS then sends a notice proposing that tax, and if you do not respond, it assesses the inflated amount and begins collecting on it. Many people first learn how far behind they are when a Substitute for Return assessment turns into a lien or a levy.

The good news: you can replace it

A Substitute for Return is not the last word. You can file your own original return for that year, even years later, claiming the deductions and credits the IRS left out. Filing your own return generally replaces the Substitute for Return through the IRS reconsideration process and brings the balance down to what you truly owe, sometimes dramatically. If the IRS has already filed substitutes for several years and is collecting, this is often the single most valuable step a tax professional can take.

If your late returns show a balance due, two separate penalties can apply, and they work differently. Understanding the difference is what makes the case for filing right away, even if you cannot pay.

• Failure-to-file penalty. This is 5% of the unpaid tax for each month or part of a month the return is late, up to a maximum of 25%. It is the larger and more aggressive of the two.
• Failure-to-pay penalty. This is 0.5% of the unpaid tax per month or part of a month, also up to a maximum of 25%. It is one-tenth the monthly rate of the failure-to-file penalty.

When both penalties apply in the same month, the IRS reduces the failure-to-file penalty by the failure-to-pay penalty, so the combined charge is 5% per month rather than 5.5%. Over time, the two penalties together top out at 47.5% of the unpaid tax (22.5% for failure to file after the overlap reduction, plus the full 25% for failure to pay), and that is before any interest.

The minimum penalty for very late returns

If a return is more than 60 days late and you owe tax, a minimum penalty applies. For returns required to be filed in 2026, that minimum is the smaller of 525 dollars or 100% of the tax due. In other words, even a small balance on a very late return carries a meaningful floor.

Interest on top of everything

Interest accrues on unpaid tax, and on many penalties, from the original due date of the return until you pay in full. It compounds daily and is reset every quarter. For individuals the rate is the federal short-term rate plus three percentage points (for example, 7% per year for individual balances in early 2026). Because interest compounds and stacks on top of penalties, an old balance can grow to a surprising multiple of the original tax.

Not every unfiled year is a year you owe. Plenty of people who fall behind were actually due refunds, often because their employer withheld more than enough tax. There is a hard deadline on getting that money back, and it catches a lot of non-filers off guard.

For a typical unfiled return where the refund comes from withholding, estimated payments, or refundable credits, you generally must file within three years of the return’s original due date to recover the refund; more broadly, refund claims are governed by the three-year/two-year lookback rules. If you file after that three-year window closes, the refund is lost permanently. You still have to file the return for compliance, but the money is simply gone.

There is a second wrinkle that pushes the same direction. When the IRS sees that you have other past-due returns, it will hold any refund you would otherwise receive on a current return until the missing years are filed. So unfiled back years can freeze a refund you are counting on today.

If the law lets the IRS reach back forever on unfiled years, does that mean someone who has not filed in fifteen years has to file fifteen returns? Usually not. The IRS follows an internal guideline, Policy Statement 5-133, under which the enforcement period for delinquent returns is generally not more than six years. For most individuals who simply fell behind, filing the current year plus the past six years is enough to be treated as in filing compliance.

Two important cautions go with that rule. First, it is policy, not law, so the IRS can require more years. It tends to do so when there is significant unreported income, a business involved, suspected fraud, or a revenue officer assigned to the case, and any deviation from the six-year norm requires manager approval. Second, you should file any older year for which the IRS already prepared a Substitute for Return, because filing your own return for that year almost always lowers the assessed tax.

Because the right number of years is a judgment call that affects both your exposure and your refunds, it is worth confirming with a tax professional before you start. Filing too few years can leave you out of compliance, and filing more years than necessary can sometimes create balances you did not need to surface.

The fear that keeps people from coming forward is usually the fear of jail. For the vast majority of non-filers, that fear is out of proportion to the actual risk, but it is worth understanding where the real line is.

Willful failure to file a return is a misdemeanor under Internal Revenue Code Section 7203, punishable by up to one year in prison and a fine (the statute sets the fine at up to 25,000 dollars, or 100,000 dollars for a corporation). Tax evasion under Section 7201 is a far more serious felony, punishable by up to five years in prison, but it requires something more than not filing. Evasion requires an affirmative act to evade or defeat tax, such as concealing income, dealing in cash to hide receipts, using nominees, or filing a false return. Simply failing to file, without those affirmative acts, is not evasion.

In practice, the Department of Justice generally reserves criminal failure-to-file charges for cases involving clear willfulness, large amounts, or other aggravating conduct, and the government has six years to bring most criminal tax charges under Section 6531. The everyday taxpayer who fell behind and then voluntarily gets current is in a very different posture than someone who actively hid income and ignored the IRS.

Once tax is assessed, whether from your own late return or a Substitute for Return, the IRS has powerful collection tools, and they escalate if you do nothing. A federal tax lien arises automatically and can be recorded publicly, attaching to your property and damaging your credit and your ability to sell or borrow. From there, the IRS can levy, which means seizing assets: garnishing wages, taking money from bank accounts, and intercepting receivables. Our guide on the IRS Notice of Intent to Levy explains the warning notice that precedes a levy and the appeal rights that come with it.

Those appeal rights matter. Before most levies, you are entitled to a collection due process hearing, a limited window in which you can challenge the levy and propose an alternative such as a payment plan. Missing that window narrows your options, which is why an unopened IRS envelope is so dangerous.

There is also a consequence many people do not expect. The IRS can certify a large, seriously delinquent federal tax debt (an assessed, unpaid balance above an inflation-adjusted threshold, 66,000 dollars in 2026) to the State Department, which can lead to denial or revocation of a U.S. passport. For business owners who travel, that alone is often the push to resolve a long-ignored balance.

A year you did not file with the IRS is almost certainly unfiled with Maryland too, and the Comptroller of Maryland is an active collector. As noted above, Maryland Tax-General Section 13-1101 lets the Comptroller assess income tax at any time when a required return was not filed, so unfiled Maryland years stay open just like federal ones. Maryland does, however, have a collection limit once tax is assessed: under Tax-General Section 13-1103, a tax generally may not be collected more than ten years after it is due, or ten years after assessment if assessed within the limitations period.

The Comptroller’s collection tools

Maryland’s enforcement options are broad and can be uncomfortable:

• Tax liens. The Comptroller can record a lien against your property to secure the debt, which can affect credit and the ability to sell or refinance.
• Wage lien. Under Maryland Tax-General Section 13-811, the Comptroller can serve a wage lien on your employer requiring it to send the part of your pay above the exempt amount directly to the state. If the employer ignores it and overpays you, the employer can become personally liable for the excess.
• License holds. Maryland can place holds that block renewal of your driver’s license and certain professional licenses until the debt is addressed.
• Bank attachment and refund offset. The Comptroller can attach bank accounts and intercept state and federal refunds.

Maryland resolution options

Maryland offers realistic ways out once your returns are filed. You can request an Individual Payment Agreement through the Comptroller to pay a balance over time, and Maryland has an Offer in Compromise program that can settle a liability for less than the full amount when you qualify, supported by a financial disclosure on Form MD 433-A. For Maryland Offers in Compromise, the Comptroller generally requires individual income tax taxpayers to be current with the current year return and the prior six tax years, and Maryland has additional timing rules if a required return in that period was not timely filed. Interest and penalties generally continue to accrue while a balance remains outstanding.

Pennsylvania taxes personal income at a flat 3.07%, and a year you did not file federally is usually unfiled with the Pennsylvania Department of Revenue too. Pennsylvania’s general assessment period is three years measured from a filed return, so it offers no shelter for a year you never filed, and the Department pursues collection assertively, including filing liens that can be revived and enforced for extended periods.

On the penalty side, the Pennsylvania failure-to-file penalty under 61 Pa. Code Section 121.26 mirrors the federal structure: 5% of the tax per month or fraction of a month, up to 25% in total, unless you can show reasonable cause. Willful failure to file is also a misdemeanor under Pennsylvania law.

The Pennsylvania local tax most non-filers overlook

Pennsylvania has a layer that does not exist in most states. Beyond the state return, Pennsylvania residents owe a local Earned Income Tax that is filed with a local tax collector for their Tax Collection District (often a third-party collector such as Berkheimer or Keystone Collections Group). These local returns are easy to forget and have their own filing and collection apparatus, so getting current in Pennsylvania frequently means addressing both state and local obligations.

Pennsylvania resolution options

Pennsylvania offers payment plans through its myPATH system, and there are two relief avenues worth knowing. The first is the Voluntary Disclosure Program, which lets eligible taxpayers who come forward before the Department contacts them limit the lookback (generally three years plus the current year for non-corporate taxes) and have penalties waived, although interest is still owed. It is available only to taxpayers who are not already registered or under inquiry for the tax in question. The second is the Board of Appeals, which has authority to compromise a liability where the amount owed is in doubt or where a compromise promotes effective tax administration.

The process of getting current is more orderly than it feels from the outside. A typical path looks like this:

1. Pull the records the IRS already has. A preparer can request your Wage and Income Transcripts and account transcripts to see exactly what income was reported, which years are missing, and whether the IRS has filed any Substitute for Return.
2. Decide how many years to file. Confirm the right scope, usually the last six years plus any year with a Substitute for Return, before preparing anything.
3. Reconstruct and prepare accurate returns. Use the transcripts, bank records, and any surviving documentation to claim the deductions and credits you are entitled to, which often slashes a Substitute for Return balance.
4. File before the government contacts you. Voluntary compliance is far better than compliance forced by a notice, and it is central to minimizing penalties and criminal risk.
5. Address any criminal exposure first. If past conduct may have been willful, talk to counsel about the Voluntary Disclosure Practice before filing.
6. Resolve the remaining balance. Once you are filing-compliant, set up the right resolution: an installment agreement, an Offer in Compromise, Currently Not Collectible status during genuine hardship, or penalty relief through first-time abatement or reasonable cause.
7. Stay current going forward. Most resolutions, federal and state, require you to file and pay on time afterward, or the agreement defaults and collection resumes.

For a broader walkthrough of how a tax matter moves from notice to resolution, see our overview of the ten steps to navigate a civil tax controversy. If your back-tax problem started with a mismatch notice rather than a full non-filing, our guide to the IRS CP2000 notice may be the better starting point.

• Ignoring the notices. Unopened IRS and state letters do not pause anything. They often mark deadlines for appeal rights, including the limited window to challenge a levy, and missing them removes options.
• Letting a Substitute for Return stand. Treating the IRS’s inflated number as final, instead of filing your own return to replace it, can mean paying tax on income with none of the offsetting expenses and credits.
• Filing without a strategy or in the wrong order. Filing returns piecemeal, or surfacing a state balance before a federal plan is in place, can trigger collection before you are ready for it.
• Missing the three-year refund window. Waiting can turn a refund you were owed into money the law will not let you recover.
• Talking to investigators without counsel. If a case has any criminal dimension, statements made to the IRS without a lawyer can do lasting harm. Get advice before you speak.
• Assuming bankruptcy will erase it. Taxes for years you never filed generally cannot be discharged in bankruptcy at all, and even late-filed returns usually must have been on file for a minimum period before bankruptcy can touch the tax. Not filing can permanently close off relief that filing would have preserved.

Most of these mistakes share a root cause, which is facing the problem alone and late. The cheapest version of this problem is almost always the one you address first, with a plan.

There is no limit. The three-year period the IRS normally has to assess additional tax only starts running once you file a return. For a year you never filed, that clock never starts, so under Internal Revenue Code Section 6501(c)(3) the IRS can assess tax for that year at any time. Maryland works the same way: under Tax-General Section 13-1101, the Comptroller can assess income tax at any time if a required return was not filed. Pennsylvania’s general three-year assessment period also runs from a filed return, so it gives no protection for a year you never filed. As a practical matter, the IRS usually asks for the last six years of returns to treat you as compliant, but the legal exposure on an unfiled year is open-ended.

For most individuals, the IRS follows an internal guideline, Policy Statement 5-133, under which filing the past six years of returns is generally enough to be considered in filing compliance. This is policy, not law. The IRS can require more years when there is significant unreported income, a business involved, suspected fraud, or a revenue officer assigned, and any deviation from the six-year norm requires manager approval. You should also file any older year for which the IRS already prepared a Substitute for Return, because filing your own return for that year usually lowers the tax. A tax attorney can confirm exactly how many years your situation requires before you start filing.

It can. Under Internal Revenue Code Section 6020(b), the IRS can prepare a Substitute for Return using the income reported to it on W-2s and 1099s. That return is built to the government’s advantage: it uses the least favorable filing status, allows only the standard deduction, and gives you none of the deductions, credits, or business expenses you would normally claim. The result is usually a much higher balance than you actually owe, and the IRS then uses it to start assessing tax and collecting. Filing your own delinquent return, even years late, can allow the IRS to reconsider and adjust the Substitute-for-Return assessment, and it often reduces the liability.

Only within three years. To claim a refund, including a refund of withholding or estimated payments and credits such as the Earned Income Credit, you generally must file the return within three years of its original due date. Miss that window and the refund is lost permanently, even though you still must file. Separately, when the IRS sees that you have other past-due returns, it will hold any current-year refund until those returns are filed. This is one reason not to wait: every year that passes can convert a refund you were owed into money you can no longer recover.

If you owe, the failure-to-file penalty is 5% of the unpaid tax for each month or part of a month the return is late, up to 25%. The failure-to-pay penalty is 0.5% per month, also up to 25%. When both apply in the same month, the failure-to-file penalty is reduced by the failure-to-pay penalty, and together the two top out at 47.5% of the unpaid tax before interest. If a return is more than 60 days late, the failure-to-file penalty cannot be less than the smaller of 525 dollars (for returns required to be filed in 2026) or 100% of the tax due. Interest runs from the original due date, compounds daily, and is set quarterly at the federal short-term rate plus three percentage points for individuals. Maryland and Pennsylvania add their own penalties and interest on state balances.

It is possible but uncommon for people who come forward and cooperate. Willful failure to file a return is a misdemeanor under Internal Revenue Code Section 7203, punishable by up to one year in jail and a fine. Tax evasion under Section 7201 is a felony punishable by up to five years, but it requires an affirmative act to evade, such as hiding income or filing a false return, not merely failing to file. Criminal cases are the exception, and the single best way to avoid them is to get compliant before the IRS contacts you. Anyone whose past conduct may have been willful should speak with a tax attorney about the IRS Voluntary Disclosure Practice before filing.

Almost always, yes. Maryland and Pennsylvania each impose their own income tax, and a year you did not file federally is usually unfiled at the state level too. The Maryland Comptroller has aggressive collection tools, including tax liens, wage liens that order your employer to send part of your pay to the state, holds on your driver’s license and professional licenses, and bank attachment. Pennsylvania’s Department of Revenue files liens and pursues collection assertively, and Pennsylvania residents also owe a separate local Earned Income Tax that is filed with a local collector. Both states offer payment plans, and Maryland has an Offer in Compromise program, but all of them require your missing returns to be filed first.

File first, then resolve the balance. The IRS generally will not approve any resolution until you are filing-compliant. Once your returns are in, the main options are an installment agreement to pay over time, an Offer in Compromise to settle for less than the full amount when you qualify, and Currently Not Collectible status that pauses collection during genuine hardship. You may also be able to remove some penalties through first-time abatement or reasonable cause. The right path depends on your income, assets, and the size of the balance, and a tax attorney can match the resolution to your facts while protecting you from liens and levies in the meantime.

No. Even after the IRS prepares a Substitute for Return and assesses tax, you can usually file your own original return for that year to claim the deductions and credits the IRS left out, which generally lowers the balance. This is handled through the IRS reconsideration process. Acting quickly matters, because once tax is assessed the IRS can move to liens and levies, and you have limited windows to challenge a levy through your collection due process appeal rights. A tax attorney can file the correct returns, request reconsideration, and put a resolution in place before enforced collection escalates.