What happens if I owe the IRS? Can I still file my taxes for this year without another penalty?

Go ahead and file your 2015 taxes. You don't want to get hit with a late filing penalty. If you have a refund coming for 2015 the IRS will apply it to the balance you owe for 2014 and send you the rest. Paying "eventually" is not an option. If you keep ignoring them they can seize your bank account or garnish your wages. If you haven't filed 2014 because you owe, do it anyway.

yea, IRS won't let you forget that you owe $500

and yes it is wise to file even if you can't pay

however if your employer did not withhold any taxes this could be another problem

first of all you may have submitted your W-4 to him incorrectly, claiming some status you were not entitled to

and then he may have been paying you as an independent contractor and not withholding taxes of any kind which will result that you also owe your self employment tax

if you owe $500 I would assume your income was something around $5K which if self employment would be $706 self employment tax, but no income tax if this was all you got

Owing tax for last year and filing your return this year are not related. Filing this year is mandatory if you have enough income to trigger a filing requirement. If you have a refund due it will be applied to what you owe.

Did you file 2014? If you did, you would have gotten bills and could have set up a payment plan.

if you failed to file, you incurred an additional $135 late filing penalty plus a penalty for filing late and interest.

You can set up a payment plan for as little as $25 a month, but a payment plan costs $120 to set up.

File anyway. The penalty is bigger if you don't file.

You'll be compounding your problems if you DON'T file your 2015 return.

Yes, interest will continue to accrue and if you are due a refund, they just take the debt from that.