1) How can I file my late 2022 and 2023 taxes?
If you have already completed your 2022 and 2023 taxes and have a paper copy, you can sign, date, and send via certified USPS mail. That way you'll have a record of the date that the IRS received it. Be sure to keep a copy that shows the date and signature for yourself. If you no longer have a completed copy to mail you can recreate it using TurboTax Desktop for prior years.
2) How much can I expect to pay in interest, fees, penalties?
The IRS will calculate your penalties and interest for you and send you a notice. The calculation will be based on:
The amount of the underpayment:
For 2022, your underpayment was $300 ($400 owed - $100 paid).
For 2023, your underpayment was $523.
The length of time the underpayment was outstanding: The penalty accrues monthly until you pay the full amount.
The penalty rate:
Failure-to-Pay Penalty: This is 0.5% of the unpaid tax for each month or part of a month the tax remains unpaid. This penalty is capped at 25% of the unpaid tax.
Underpayment of Estimated Tax Penalty: This is calculated based on the IRS's quarterly interest rates, which are the federal short-term rate plus 3 percentage points. The rates for 2022 and 2023 changed throughout the year. For example, in 2023, the interest rate for underpayment of estimated taxes was as high as 8% for individuals.
Interest: The IRS will also charge interest on the unpaid tax and any penalties. The interest is compounded daily and the rate changes quarterly. For the last quarter of 2022, the underpayment rate was 6%, and it was 7% for the first three quarters of 2023, increasing to 8% for the last quarter of 2023.
3) When I file, is my balance immediately due or can I setup a new payment plan? If I don't have the money ready, any recommendation on how to best handle my balance?
If you can find an interest rate through a local bank or other financial institution that is better than what the IRS will charge, you may want to pay immediately. Alternatively, you can set up an IRS payment plan.
4) Anything else you may recommend? You may want to consider filing for a request a First-Time Abatement (FTA) or requesting a waiver due to Reasonable Cause. To compare interest rates on personal loans, please consider Credit Karma.
I'm so glad to hear you're getting all caught up on filing your taxes!
Cindy
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