WHAT DO i DO IF i OWE MORE TAXES THAN i CAN PAY? i BECAME WIDOWED IN 2005, AND HAVE TAKEN MINEY OUT OF MY IRA TO LIVE ON.
2007-02-23 11:14:04 · 8 answers · asked by JACKIE M 1 in Business & Finance ➔ Taxes ➔ United States
Okay. The IRS will work with you to develop a payment plan if you have to have one.
If you used the money you withdrew to cover medical bills or make major home improvements, you may not have to pay as much tax on that as you otherwise might have.
I suggest you use a reputable tax preparer and let them take a look at your situation. They'll have forms to fill out that you can send in to ask for a payment plan if it's needed.
If you have a dependent child at home, you will be able to file as Qualifying Widow and that's a better tax bracket than Single or Head of Household.
You've already been through the hardest phase of your life. This will pass and it will all work out.
2007-02-23 11:23:08 · answer #1 · answered by Anonymous · 0⤊ 0⤋
If you got a distribution from a traditional IRA (there are other rules for a Roth IRA), and you are under age 59-1/2, you will have to pay the tax on the distribution plus a 10% early withdrawal penalty. There are exceptions to the penalty but for a traditional IRA you will always have to pay the tax, even if you are over age 59-1/2. If it's a Roth IRA, other rules apply. Assuming it's a traditional IRA, a few valid reasons to withdraw money without penalty include a first-time home purchase (up to $10K) and for major unreimbursed medical expenses. It is true that the qualified widow(er) filing status has a preferential tax treatment but you must not have remarried and you must have a dependent child who lived with you all year in 2006 to qualify for that filing status. If the IRA distributions are your only source of income, it might be wise to request they withhold federal taxes from each distribution so you don't get stuck with a big tax bill at the end of the year. I'm sorry for your predicament and I hope this information helps. Any good tax preparer should be able to give you more specific in-person advice.
2007-02-23 22:00:55 · answer #2 · answered by Lilly 3 · 0⤊ 1⤋
Firstly, If the returns have been self-prepared on done by a friend, have you thought of having your tax returns reviewed by a CPA? It's amazing what they can find for you. I wonder if the issue is that you took money out of your IRA and you are now havig to suffer the 10% penalty. There are exceptions from the penalty so make sure that you are claiming those. That may well reduce or eliminate your tax bill.
Was the IRA yours or your late spouse's? If it was your spouse's you may actually be able to take a distribution free of penalty. In fact, you may be required to take distrributions.
If none of this applies, you have two options. You can borrow from the IRS by setting up a payment plan or you can borrow from a bank or credit card, pay the IRS then pay off the loan in time. It may seem easier to go with the IRS but they can be expensive. If you can get a low-interest credit card, that may be your best deal. Please try to resist drawing on your IRA if doing so would subject you to another penalty. That really is a vicious circle.
In case it is the IRA withdrawal that is causing you problems, I have attached a link which you may find helpful.
Good luck with this. I hope it works out for you.
2007-02-23 19:32:42 · answer #3 · answered by skip 6 · 0⤊ 2⤋
There are hardship distributions available to you from IRAs and 401ks that minimize the taxes you have to pay. Have an accountant look over your situation or go find a VITA program to look at it. If you still owe more than you can pay, the IRS will let you workout a payment plan.
2007-02-23 19:18:51 · answer #4 · answered by Brad S 2 · 1⤊ 0⤋
I would go to a CPA or knowledgeable tax preparer. You widow status has some tax advantage for a couple of years.
Additionally, you can work out a payment plan with the IRS. I believe that you can stretch it out to finish paying by December of the closing year.
2007-02-23 19:33:56 · answer #5 · answered by Lawrence R 2 · 0⤊ 2⤋
Contact the IRS and see what sort of payment arrangements they can make with you. Depending on you circumstances they will work with you on the balance that you owe
Call 1-800-829-1040
2007-02-23 19:18:53 · answer #6 · answered by Rob 7 · 3⤊ 1⤋
check out the links
http://www.online-couponcodes.com/online-coupons.php?coupon=45292
http://www.online-couponcodes.com/online-coupons.php?coupon=45105
2007-02-25 22:44:31 · answer #7 · answered by ellen h 2 · 0⤊ 0⤋
get some help, from where i don't know.
2007-02-23 19:17:51 · answer #8 · answered by Anonymous · 0⤊ 3⤋