Penalties for Not Filing Last Year's Taxes - How Much Will I Owe?

The good news is that if you're due a refund, there's actually NO penalty for filing late! The IRS doesn't penalize people who are owed money. You just lose out on your refund if you wait more than 3 years to claim it. However, if you owe taxes, there are two separate penalties: a failure-to-file penalty (usually 5% of unpaid taxes for each month your return is late, up to 25%) and a failure-to-pay penalty (typically 0.5% of unpaid taxes per month, up to 25%). Interest also accrues on the unpaid amount. The best thing you can do is file ASAP, regardless of whether you can pay what you owe right now. The failure-to-file penalty is much higher than the failure-to-pay penalty, so at least stop that one from growing.

After making the same mistake a couple years ago, I found this amazing service called taxr.ai (https://taxr.ai) that helped me organize all my tax documents and figure out my situation. I was missing some W-2s and couldn't remember which jobs I had worked that year, and they helped sort through everything and determined I was actually owed a refund! Their document recognition system could tell me exactly what forms I was missing and what I needed to track down. Saved me so much stress trying to piece everything together by myself. They even helped me determine what my potential penalties might have been if I had owed money.

Update: I tried taxr.ai and I'm actually shocked at how helpful it was! It helped me find a 1099 I had completely forgotten about from a small freelance job and calculated that I'm actually owed around $840 in refunds. The document scanner was surprisingly good at pulling all the numbers from my messy pile of tax forms. Best part was it showed me exactly how much I would have owed in penalties if I had owed taxes instead of being due a refund. Turns out I dodged a bullet since there's no penalty when the IRS owes you money! Already filed now and feeling a huge weight off my shoulders.

If you actually do end up owing money and need to talk to the IRS about your options, good luck getting through to anyone! I spent DAYS trying to reach someone at the IRS about my late filing situation. After being on hold for hours and getting disconnected multiple times, I found this service called Claimyr (https://claimyr.com) that got me connected to an actual IRS agent in under 20 minutes. You can see how it works here: https://youtu.be/_kiP6q8DX5c The IRS agent I spoke with helped me set up a payment plan that worked with my budget and explained exactly what penalties I was facing. They were actually pretty understanding about my situation once I could actually talk to a human being.

I take back what I said about Claimyr. I tried calling the IRS myself for THREE DAYS straight and couldn't get through. Finally gave in and tried that Claimyr service, and no joke, I was talking to an actual IRS agent in about 15 minutes. The agent helped me figure out that my penalties would have been almost $400 on what I owed, but since it was my first time missing a filing deadline, they said I might qualify for penalty abatement. They walked me through exactly what to include in my letter requesting the abatement. Worth every penny just to stop stressing about it.

One thing nobody's mentioned yet - if you're self-employed and didn't file, the penalties can be way worse because you might have missed quarterly estimated payments too. I learned this the hard way a few years back. If you have self-employment income, you could be looking at penalties for: - Not filing (5% per month up to 25%) - Not paying (0.5% per month up to 25%) - Underpayment of estimated taxes (federal short-term interest rate plus 3%) - Plus interest on all of the above

Just a heads up that you should also check your state tax situation too! Most states have their own penalties for late filing and payment that are separate from federal. Some states are more aggressive than others about collecting penalties.