Why You Always Should File a Tax Return -- Even if You Owe Nothing

Most people dread doing their taxes every year, whether or not they owe the IRS money. Thanks to the insane complications of the federal tax code, just filling out the return can be an enormous hassle. But if you're tempted to skip filing this year, think again -- not filing your tax return can put you in hot water.

The IRS considers not filing a return to be a more heinous offense than filing and not paying. The late-payment penalty is 0.5% of the unpaid taxes per month; the failure-to-file penalty is 10 times greater at 5% of the unpaid taxes per month.

Both penalties are capped at 25% of the unpaid taxes -- each. So if you owe $1,000 in federal income taxes for the year, and you don't file your return or pay, you could end up owing an extra $500 in penalties. If you file the return but don't pay, the most you could owe for these penalties is $250 (plus interest).

Source: Fool.com