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So I am going to owe $3500 in Federal

alm99

Diamond Member
Not really just me, but my wife and I. This will be the first time we will ever owe anything and its not like we have $3500 just laying around. Will I be able to make payments rather that just a lump sum so we avoid serious financial stress? I realize that by making payments the government will surely want interest on it.

So, anyone know if I can make payments and not a lump sum?
 
I'd go see someone who is very experienced in taxes.....hate to see you get hit with penalties for underreporting income during the year.
 
You will have to file an extension and also there is a form in taxcut that notifys the goverment that you need to pay in payments. I would also recommend checking out the IRS's website for info.

Good Luck

Ausm
 
You can make payments, but you have to set up a payment plan with the IRS.

I did this back in 1997, IIRC. They charged me an "administrative fee" of $45 just to set up the "account." Then, they charged me 13% interest on my balance until it was paid off.

All b/c I didn't have $600 dollars to pay them off up front. :| Never again. What I do now is file an extension before April 15th. That gives me until August. They still charge interest, but it's not as bad as when you set up a payment plan. Plus, there's no BS administrative fees.
 
Originally posted by: MichaelD
You can make payments, but you have to set up a payment plan with the IRS.

I did this back in 1997, IIRC. They charged me an "administrative fee" of $45 just to set up the "account." Then, they charged me 13% interest on my balance until it was paid off.

All b/c I didn't have $600 dollars to pay them off up front. :| Never again. What I do now is file an extension before April 15th. That gives me until August. They still charge interest, but it's not as bad as when you set up a payment plan. Plus, there's no BS administrative fees.

So it would be better for me to file an extension and save the money this way? I have close the amount that is needed, I should have the rest in a month or so. I just would rather not use most of our savings for this.

EDIT: What form do I need to file an extension?
 
Extension form looks like 2688.
Im finding all of this in TaxCut 2002. 😉

I owe $6000. And I'm still paying a payment plan from last year. Don't know what I'm going to do yet. :|
 
Originally posted by: Mutilator
Extension form looks like 2688.
Im finding all of this in TaxCut 2002. 😉

I am at work so i can't. But I greatly appreciate the help I am getting. I don't want Uncle Sam to give it to me anymore than I am already getting it.
 
Well, I'm glad to see that I'm not in the "Owe Boat" all by myself. My GF got back $500 and change...she spent it all two weeks ago. 😛
 
Yes there is a form to file to make payments. I just happen to have my 1040 here so I could make copies and send it in today. On the 1040 line #67 it says,

"Amount paid with requenst for extension to file (see page 56)."

Now on page 56 of the instructions it says,

"file Form 4868 to get an automatic extension of time to file Form 1040..."

Just download Form 4868 and follow its instructions. Then you can file Form 1040 later than April 15th. I'd suggest you pay as much as you can now (and you seem to have most of it already) to minimize interest. The interest rate is 0.5% per month (about 6.2% per year) if you properly file Form 4868. This is a very easy form to fill out - basically your name, address, and how much you want to borrow. Very simple.



You asked about under reporting. Line 74 on Form 1040 says,

"Estimated tax penalty (see page 57)."

Lets look on page 57,

"You may owe this penalty if" you owe "at least $1,000 and it is more than 10% of the tax shown on your return".

You owe more than $1000 which meets the first criteria. Now if your total tax is less than $35,000 you owe a penalty because you meet that second criteria - you didn't pay enough taxes throughout the year. Our tax system is a pay as you go system. You are required by law to pay a minimum of 90% of your tax you owe each and every paycheck (or stock sale or whatever earned you money). If your total tax is less than $35,000 then you didn't pay that minimum of 90%. Thus you likely owe a penalty. File Form 2210 to find out how much the penalty is. Warning, Form 2210 is complicated and you can ask the IRS to fill it out for you and send you a bill for your penalty.

By the way, this is all in your instruction booklet that the IRS mailed you. I don't use tax software since the taxes I owe are pretty straightforward and the instructions are very helpful telling you step by step what to do. But even with using tax software, you can still look up the instructions quickly and easilly by hand.
 
A couple of years ago I had to pay in $1600. When I talked to the IRS, they said that it would be better to get the money from somewhere else... there are a lot of penalties involved with extensions and such. Go to the bank and get a loan or something. This was the IRS telling me this, so you know it had to be pretty bad.
 
how do you guys get in such situations where you keep having to pay in 3,4,5, 6k dollars every year... ??

I could not even imagine..
 
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