I did not file last year.. now what?

[user17581332278]

I didn't file last year sonow what? Why do i owe so much on a w2? I can't afford to pay what they are asking so i just didn't file, what do i do?

[SwapnaM]

Even if you can't pay what you owe, filing is the most important first step. 

The IRS has two different penalties, and the one for not filing is much more expensive.

• Failure-to-File Penalty: This is a penalty of 5% of the unpaid taxes for each month or part of a month your return is late, with a maximum penalty of 25%. For 2023 returns filed more than 60 days late, the minimum penalty was $450 or 100% of the unpaid tax, whichever is less.

• Failure-to-Pay Penalty: This penalty is only 0.5% of the unpaid taxes for each month or part of a month the tax remains unpaid.

The first and most important step to fixing this is to file your tax return immediately. This will stop the Failure-to-File penalty from growing.

If you had a W-2 job, you might owe taxes if:

• Too little was withheld from your paycheck.
• You had multiple jobs and didn’t adjust withholding.
• You claimed exemptions or dependents that reduced withholding.
• You had other income (e.g., side gigs, investments) not covered by W-2 withholding.

What to Do Now:

1. Even if you can't pay, file the return. This will stop the most expensive penalty and show the IRS you are trying to resolve the issue.
2. Explore Payment Options: https://www.irs.gov/payments 

   Set Up a Payment Plan

   • Online at irs.gov/payments
   • Short-term (up to 180 days) or long-term (monthly)
   • No need to pay in full right away

   b. Request an Offer in Compromise

   • Settle your tax debt for less than you owe if you qualify
   • Based on income, expenses, and assets

   c. Temporarily Delay Collection

   • If you're in financial hardship, the IRS may mark your account as “currently not collectible”

@user17581332278 Thanks for the question!!

[user17581332278]

@SwapnaM how do I file without payment??  It was asking for payment so I stopped. Is it too late to file without getting a failed to file penalty?? 

[SwapnaM]

Yes, you can absolutely file your tax return using TurboTax without making a payment at the same time. The process is designed to allow you to file by the deadline, which is crucial for avoiding the substantial failure-to-file penalty, and then address the payment later.

To file your return without immediate payment, you will navigate to the "File" section of the TurboTax software. While you will first need to pay the fee for the TurboTax program itself, the subsequent steps for paying your taxes are separate.

When prompted for payment of your taxes, look for options such as:

• "I'll mail a check": This option allows you to send a physical check directly to the IRS. TurboTax will provide a payment voucher with the correct mailing address.

• "Set up a payment plan": This option is for taxpayers who need to pay off their tax debt over time. TurboTax can guide you through the process of applying for a payment plan with the IRS.

• "Pay by bank account" or "Pay by credit card": If you are not ready to pay now, you can simply skip these options.

For those who are filing a paper return, the process is even simpler. Once your return is complete, you will print it and mail it to the correct IRS address for your state. There is no need to include a check or payment voucher with your return. You can make the payment separately at a later date, either online through the IRS website or by mailing a check with a payment voucher.

The most important thing you can do right now is file your return. Filing your return, even if you can't pay, will immediately stop the accrual of the much more expensive Failure-to-File penalty. You will still have the Failure-to-Pay penalty and interest, but this is a much more manageable situation.

@user17581332278 Hope this helps!!