IRS/Taxes question ....

[dustysky]

And the hits just keep coming, as if I dont have enouph issues right now I got a letter yeasterday saying we owe the IRS $1,400.

I looked back and yup sure enouph it was my error when inputting the info last year.

My question is this: when I file this year will they take that money directly out of this years return or will they let us make payments towards the amount due (they sent a form saying we could make payments )?

 

[bicker]

We actually got a letter last year telling us we owed $14,000! Luckily, it was only because the money they thought they found was almost all the cost basis of the investment. It took a while for them to help us figure out which of the money was actually capital gain -- our extra tax ended up being $120.

What I do remember, though, is that they don't mix the two tax years together, at least not via the basic forms and processes. I don't know if you'd be required to give up your tax refund to cover some of the missing tax or not, but I don't believe they will make you pay more on your 2006 1040 (specifically) just to cover this $1,400 bill.

 

[1Prince2Princesses]

I'm not sure if you have to pay it out of your return this year, but if you're getting a refund it might be a good idea. The reason I say this is because while they will let you make payments on the amount owed from last year, you will have to pay interest and penalties, which can amount to a good deal of money. If you can sacrifice this year's refund, you may want to go ahead and pay it off.

It might be in your best interest to see a tax professional about this, or call the IRS directly. Good luck!

 

[kellyg403]

I believe that Bicker is correct. With the new IRS rules, you can only be on the payment plan for one tax year at a time. My dh is self employed and last year there was a problem with taxes paid one quarter. If we were to get a tax return this year we would not actually get it it would be applied to any outstanding debt we owe.

The IRS people were actually alot friendlier that I thought they would be. I grew up believing they were like the KGB and I prefered not dealing with them. But it definitely was a surprise to deal with them.

Kelly

 

[Disneyfan63]

Hi,

The tax laws do not permit IRS to issue a refund if you owe back taxes; so the refund WILL be applied to the debt, and any excess will be sent to you.

Jim

 

[Cheshire Figment]

I would suggest first respond (by phone) to the letter. Do not ignore it under any circumstances.

If you will be expecting a refund of at least that amount this year I would suggest filing the 2006 return as quickly as possible. There would then be two possibilities.

One is that they would deduct the amount owed from the refund and that will end everything.

The other is they will process and pay your refund, in which case you should immediately pay them the money you owe.

Another option is if you have the money available, send them the money right away but do not file the 2006 return until you have acknowledgement that they have applied the money so it does not get messed up.

Last thing, is if you are usually getting large refunds you should adjust your withholding so you get more during the year and not giving the government a free loan.

Mike, CPA (Retired)

 

[Cindy's Mom]

First off, I wish you luck and patience.....same thing happened to us 2 tax years ago, last year's filing time. We got the letter that we owed $1920 I called our accountant, he said we didn't and the reason why.

I didn't want to file in Feb 2006 because we were expecting a refund and knew they would take that money first. But then it was April 15th, (We never ever filed then) and I just had to mail the forms in. I called the IRS every day for 3 months. Everyone kept saying that it wasn't their department. I FINALLY got some one who would listen to me, they apologized like crazy. and cleared out the 2004 taxes and issued our refund for 2005.

It was a complete and utter nightmare - I don't wish that upon anyone.

 

[dustysky]

Thank you for all the reply's. The big issue is that this year we NEED our refund in FULL because I have no car and the only that is being lent to me must be returned by the first of March.

If they do take out there owed money then so be it and I will have to re-adjust my car purchase plan.

As far as having less out yearly, we acctualy like doing it this way, it gives us a large "chunk" at the end of every year that we either use for what we want or need. (Saving is just not an option for us, something ALWAYS comes up.