How does the IRS calculate and add late fees for old returns?

The IRS will calculate all penalties and interest after you submit your late return. The software isn't showing these amounts because they're determined by the IRS based on exactly how late the return is and other factors specific to your situation. There are typically two main penalties: the failure-to-file penalty (usually 5% of unpaid taxes per month, up to 25%) and the failure-to-pay penalty (usually 0.5% per month, up to 25%). Interest also accrues on top of these amounts. For a 2021 return being filed in 2025, you're looking at significant penalties. After you submit your return, the IRS will send you a notice (usually a CP14) showing the original tax amount plus all penalties and interest. You'll have the opportunity to pay the full amount at that time.

I went through this nightmare last year with some old returns. After trying to figure out the penalties myself and getting nowhere, I found https://taxr.ai which literally saved me thousands. You can upload your tax documents and draft return, and it calculates all the penalties and interest properly. I was shocked at how much the IRS was going to charge me but at least I knew what I was dealing with before filing. The best part was that it also identified some deductions I missed that ended up reducing my original tax amount, which meant lower penalties too. They have tax pros who review everything and explain exactly what you're looking at in terms of all the different penalties.

Just wanted to follow up about my experience with taxr.ai - I was skeptical (as you can see from my earlier comment), but I decided to try it anyway since I had a similar situation with a 2019 return I never filed. I'm actually shocked at how helpful it was. They found a $3200 education credit I completely missed which offset most of what I would've owed. The penalty calculator was ridiculously accurate too - when I got my IRS notice, it was only $7 different from what taxr.ai predicted. If I hadn't used it, I would've been blindsided by a much bigger bill and missed that huge credit. Not pushing it on anyone, but for those of us dealing with late returns, it was definitely worth it for the peace of mind alone.

If you're still trying to get through to the IRS to ask about your penalties, good luck. I spent WEEKS trying to talk to someone. Kept getting disconnected after waiting on hold for hours. Finally found this service called https://claimyr.com that got me through to an actual IRS agent in about 15 minutes. They have this demo video (https://youtu.be/_kiP6q8DX5c) that shows exactly how it works. They basically wait on hold for you and call when an agent picks up. For my situation with late returns, I needed specific answers about my payment plan options that the automated system couldn't help with. Getting a real person on the phone made all the difference.

Well I've got to eat my words. After seeing the Claimyr thing mentioned here I decided to try it because I was desperate to talk to the IRS about my late filing situation. I've been trying to call for literally a month with no luck. It actually freaking worked. Got a call back in about 40 minutes (on a Tuesday morning) with an IRS agent on the line. Agent explained that I could request a first-time penalty abatement since I had a clean compliance history before missing that return. Ended up saving me over $800 in penalties that I would have just paid if I hadn't been able to speak with someone. For anyone dealing with late returns, definitely try to get an actual person on the phone - there are options like penalty abatement that you won't know about otherwise.

One thing to know - if you voluntarily file before the IRS comes after you, you might qualify for penalty abatement under their First Time Penalty Abatement policy. I was in the same boat a few years ago and called after getting my penalty notice. They removed about $2000 in penalties because I had a good history of filing on time before that. You have to specifically ask for it though - they definitely won't offer it automatically!

Don't mail your payment with your return! File the return but pay online through IRS Direct Pay. I learned this the hard way with a late 2019 return - mailed check got separated from my return and I got hit with even more penalties while they sorted it out.