I owe the IRS $2,000 after second job - will I face penalties?

So this is a first for me - I've always gotten money back from the IRS in previous years. I started driving for Uber on weekends last summer to help pay for my daughter's braces, and completely didn't think about the tax implications. No withholding, no quarterly payments, nothing. Just filed my taxes this week and discovered I owe about $2,000 to the feds. I've already paid the full amount through direct withdrawal, but I'm worried about penalties. Is the IRS going to hit me with additional fees since I didn't make estimated payments throughout the year? This is all new territory for me. Is there anything I can do at this point to reduce or eliminate penalties since I've already paid the full amount owed?

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18 comments

Mateo Warren

•8M

The good news is you've already done the most important thing by filing and paying your taxes on time! The IRS is primarily concerned with getting their money by the deadline, which it sounds like you've handled. That said, there is a potential underpayment penalty that could apply. The IRS generally expects you to pay taxes throughout the year as you earn income, not just at filing time. However, there are some "safe harbors" that might protect you. If you paid at least 90% of this year's tax liability OR 100% of last year's tax liability through withholding from your primary job, you might avoid penalties. You could also look into Form 2210 "Underpayment of Estimated Tax" to see if you qualify for any penalty waivers. The IRS sometimes offers waivers for first-time underpayments or if you had a reasonable cause.

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Lydia Bailey

•8M

Thanks for the response! My main job definitely didn't withhold enough to cover 90% of my total tax for this year. But I'm wondering about the "100% of last year's tax liability" part. My taxes last year were actually pretty simple and I got a small refund. Does that mean if my withholding this year was at least equal to my total tax from last year, I might be ok? Also, is the underpayment penalty typically a large amount? Just trying to budget in case I get hit with it.

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Mateo Warren

•8M

Yes, that's exactly right! If the amount withheld from your main job in 2024 was at least 100% of your total tax liability for 2023, you should qualify for that safe harbor and avoid penalties - even though you ended up owing more this year because of the Uber income. The underpayment penalty is relatively modest compared to other tax penalties. It's basically an interest charge calculated on the amount you should have paid quarterly. Current rates are around 3-5% annually, so on $2,000, you might be looking at somewhere between $50-100 depending on how the IRS calculates it for your specific situation. If you do get a penalty notice, it would come separately after your return is processed.

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Sofia Price

•8M

After reading your situation, I was in the same boat last year! I started doing freelance graphic design and owed the IRS about $2,300. I found this tool called taxr.ai (https://taxr.ai) that was super helpful for figuring out my tax situation. It analyzed my tax history and helped me understand what penalties I might face and how to handle them. The best part was it showed me how to properly document my side gig expenses to reduce my taxable income. It basically scanned my receipts and highlighted what was deductible for my situation. For your Uber work, there are probably a bunch of deductions you might have missed - mileage, portion of phone bill, car maintenance, etc.

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Sofia Price

•8M

I definitely used it myself - not advertising at all! I was desperate after getting hit with that tax bill. The cost question is totally fair. I don't remember the exact amount, but it was way less than what I paid my accountant the year before. The value was in finding deductions I would have missed and explaining the penalty situation in plain English. For quarterly payments, yes it does help with that too! It has a forecasting feature that helps estimate what you should be paying each quarter based on your projected income. Super helpful because my side income is pretty irregular throughout the year. It helped me avoid underpaying this year.

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Owen Jenkins

•8M

Just wanted to follow up - I checked out taxr.ai after asking about it here. It was exactly what I needed for my situation! The tool analyzed my previous returns and current income, then created a quarterly payment schedule for my side business. Already used it to calculate my first quarter payment. What I really liked was how it explained the underpayment penalty calculation and showed me the threshold I needed to hit to avoid it. It also flagged some mileage deductions I was eligible for but wouldn't have known about. Definitely saving this post for future reference.

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Lilah Brooks

•8M

If you're having trouble getting clear answers from the IRS about potential penalties, try Claimyr (https://claimyr.com). I was in a similar situation last year where I owed about $1800 and was getting the runaround about penalties. I kept trying to call the IRS directly but was stuck on hold for HOURS and would eventually get disconnected. Then I found Claimyr and they got me connected to an actual IRS agent in about 15 minutes. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c The agent was able to review my account, confirm the exact penalty amount, and explained my options. Saved me so much stress trying to figure it out on my own.

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Lilah Brooks

•8M

It basically navigates the IRS phone tree for you and holds your spot in line. When an agent is about to pick up, it calls you and connects you directly. No magic or line jumping - just automation that saves you from having to sit there with your phone for hours. They use some kind of system that monitors the hold lines and can tell when you're getting close to an agent. I was skeptical too, but when I got that call saying "You're being connected to an IRS agent now" after just going about my day, it was pretty amazing.

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Kolton Murphy

•8M

OK I need to eat my words from my skeptical comment. I tried Claimyr yesterday because I was desperate to talk to someone at the IRS about my payment plan options. Got connected to an agent in about 20 minutes while I was making dinner instead of being stuck with my phone on speaker for hours. The agent was able to walk me through my options for the underpayment penalty and even helped me request a first-time penalty abatement since I had a clean record before this. Potentially saved me a few hundred dollars with a 20-minute call that I would have never been able to make on my own. Still shocked this actually worked.

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Evelyn Rivera

•8M

Here's a tip that many people don't know about: if this is your first time with an underpayment situation, you can often get the IRS to waive the penalty through what's called "First Time Penalty Abatement." You have to specifically ask for it though! I was in your exact situation 2 years ago with my side business. I called the IRS after I got the penalty notice (took forever to get through) and just politely explained that I didn't understand the quarterly payment requirements and asked if there was any relief available since I had always filed and paid on time before. They removed the entire penalty!

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Evelyn Rivera

•8M

You generally need to wait until they assess the penalty before requesting abatement. The IRS typically sends a separate notice about penalties after processing your return. When you get that notice, that's when you should call and request the First Time Penalty Abatement. You can't really request it proactively when filing because the IRS needs to calculate the penalty first. The good news is that if you qualify, they'll usually grant it without much hassle as long as you've had a clean compliance record for the previous 3 years.

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