What's the penalty for not filing last year's taxes?

So if I'm understanding correctly, there's actually a bigger penalty for not filing vs. not paying? That seems kinda backwards. What if someone doesn't file because they know they can't pay?

Yes, that's exactly right - the failure-to-file penalty (5% per month) is ten times higher than the failure-to-pay penalty (0.5% per month). The IRS designs it this way deliberately because they want you to file even if you can't pay. Many people make that mistake - they avoid filing because they can't pay, but that's the worst thing you can do. The IRS has payment plans, and sometimes they can even reduce what you owe through various programs. But they can't help you at all if you don't file and tell them what you owe in the first place.

How accurate were their penalty calculations? I'm worried about using an automated service for something this important where I could potentially owe a lot.

Does it work if you're missing some documents? I lost some of my 1099s from last year during a move and was wondering if this would still help.

Their penalty calculations matched almost exactly with what the IRS ended up charging me - just $13 difference in the end. They use the same formulas the IRS does, and it updates based on how long you've delayed filing. For missing documents, that's actually why I tried them in the first place. I was missing two 1099s and wasn't sure how to proceed. The system helps reconstruct your income based on bank statements and other available documents. It's not perfect, but it got me close enough that I could confidently file without stressing about whether I was making things worse.

Wait, how does this actually work? Do they have some special connection to the IRS or something? I'm confused how they can get through when nobody else can.

Yeah right. Sounds like a scam to me. No way some random service has a magical backdoor to the IRS that nobody else knows about. You probably work for them.

They don't have any special connection to the IRS - they use technology to continuously call and navigate the IRS phone tree until they get through to the queue for a human agent. It's the same process you'd go through manually, just automated. When a human finally answers, you get a call connecting you to that agent. I don't work for them, I'm just someone who wasted way too many hours listening to the IRS hold music before finding this service. Look at it this way - the IRS wait times are often 2-3 hours right now. You can spend that time with your phone on speaker trying to get through, or you can go about your day and let technology handle it. For dealing with penalties on unfiled taxes, I needed to talk to a real person at the IRS.

Thank you for mentioning this! I've never had any tax issues before, always filed and paid on time. How exactly do you apply for this abatement? Is it something I would request after I file my late return?

Yes, you request it after you file your late return and receive a bill or notice from the IRS about penalties. You can call the IRS and specifically ask for "First Time Penalty Abatement" for your failure-to-file penalties. The requirements are that you had no penalties for the 3 tax years prior to the year you're requesting abatement for, you've filed all currently required returns (or filed extensions), and you've paid (or arranged to pay) any tax due. Based on what you've shared, you'd likely qualify since this is your first time missing a filing deadline.

Totally agree with this advice. I learned the hard way that "perfect is the enemy of done" when it comes to taxes. I waited 18 months to file because I was missing some documents and wanted everything perfect. Big mistake - penalties kept growing the whole time.