tax question...

**murph** · 03-02-2011, 12:24 PM

we found out that we owe more federal taxes than we thought this year. We don't think we'll have the full amount by April 15. I talked to the IRS and the representative I talked to said that I should file my taxes and pay the most I could at that time. She said I would likely pay 4% interest on any unpaid taxes, but that would be the only fee I would incur.

I asked about an extension, but you can only get an extension to file, not to pay, which seems odd to me.

Has anyone ever run into this? I'll likely be about $400 short in April, but will be able to pay that in May.

I know this is a watered down version, but are there other questions I should be asking?

**beks37** · 03-02-2011, 01:31 PM

Everything they told you is correct. File your return now and pay as much as you can by the due date (April 18th this year). The extension is only to file, not to pay. If you pay after April 18th, then you will owe penalties and interest for late payment. I would do what you can to make up that extra $400....I wouldn't want to pay penalties and interest to the IRS!

**Greebo** · 03-02-2011, 04:39 PM

In addition to the above - make the IRS debt your #1 priority. It becomes first in the snowball. Even if you end up paying more interest, it is preferable to take out a loan to avoid having to owe the IRS money.

Why?

The IRS HAS NO LIMITS. They can, on a whim, freeze accounts, seize assets, etc. Credit cards and personal loans cannot.

This is not new debt - you owe the IRS the money - so move the debt over to something that CANNOT DESTROY YOUR LIFE AT THE PUSH OF A BUTTON and keep OFF the IRS's radar.

**murph** · 03-02-2011, 04:54 PM

thanks to both of you for you answers.

We are definitely making this our #1 priority and will have this paid off by the first week or two of May. All in all I want to wipe my hands clean of this by mid-May.

We're also looking at next year. We actually took a bump in salary this past year, which helped us pay off other debts, but unfortunately it meant we owed more in taxes. My wife and I have already scheduled times to talk to our HR departments to look at flex spending accounts for health-related expenses and child care. I've been told that starting an IRA will help with taxes, but I want to pay some more things off before I do that.

Are there any other tips to lower one's tax burden?

**Greebo** · 03-03-2011, 06:54 AM

Originally Posted by murph

Are there any other tips to lower one's tax burden?

Unless you are in the Alternative Minimum Tax range, as a typical employee the only way to lower one's tax burden is to spend more money than you'll save.

BTW how did you prepare your taxes? Have you had them double checked? You can run through TurboTaxOnline.com and figure out your numbers there for free if you don't file (filing is what they charge for).

**wjcalderon** · 03-03-2011, 07:35 AM

Please correct me if I'm wrong, but my understanding is that you won't be charged a penalty if you file your taxes on time and pay what you can.
You will only be charged interest until you pay the balance.
Since you're talking about a month of interest on $400, it should be a very small amount.

**MrMom** · 03-04-2011, 11:26 AM

About 10 yrs ago we figured on about a 2K refund due to some quick numbers in turbotax but with the 2 small businesses and a few other things that made our taxes a bit more complex, we did hire an accountant.

OMG he grilled us asking about 50 questions, and in the end we ended up with a return 3x the amount we had assumed it would be wow it was amazing!

I think we pay around $220 a year for him to do it all for us but we have multistate state taxes, 2 businesses, the house stuff and other stuff mixed in, so it's well worth it for us, and he still 10 yrs later calls emails and digs and asking about stuff we never thought to figure in.

One year we did owe tho and it was because we didn't follow his quarterly estimated payments on some income that was not taxed, long story short yes we owed yes we filed and paid a portion, and then we paid the balance (under a grand) RIGHT away i believe it was less than 2 months, just didn't want to owe the IRS in anyway shape or form...

Worst case file it on time of course send in what you can, have the balance and i'd say make some ebay or craigslist posts, have a garage sale, whatever and zap that $400 off ASAP... At least it isn't 4 grand right?

Hope you guys are able to make things work and get them paid asap...

**murph** · 03-07-2011, 04:30 PM

I definitely feel better about it! We figure that we should be able to pay the $400 off in early May, which is definitely what I want to to do. I'm going to call to make sure I can do this, but I'm planning on dropping off the payment at a local IRS office.

Moving forward, we are going to put some money in some pre-tax spending accounts for child care and health benefits through work, so we think that might help with what we might owe in future years.

**murph** · 03-07-2011, 04:31 PM

oh...and we did our taxes with the free version of turbo tax and paid for our state taxes. We filed the state (because we actually got something back from them), and will file the federal when we get that money back.