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Should I use IRA to pay IRS?

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Money Talk > Taxes

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kalsat
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Should I use IRA to pay IRS?  Reply with quote  

We owe over $10k in taxes this year. We are a single income family and don't have money to pay taxes. Should we withdraw from our IRA to pay our taxes to avoid IRS penalties, or file an extension and try to come up with the money by October?

Either way, we will be penalized by the IRS for paying late or for withdrawing from our IRA before 59 1/2. Confused
Post Thu Apr 12, 2012 8:40 pm
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eastmn
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I'd talk to a tax expert, to try and bring it down a bit. Otherwise, I'd call IRS and work out some sort of payment plan.

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Post Thu Apr 12, 2012 9:35 pm
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loanuniverse
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Taking into consideration that the penalty is 10%, would you be able to pay the $10,000 in a couple of years?

Because I am thinking something like a HELOC might work in this case with rates as low as they are right now.

However, it is probably to late because the returns are due in a couple of days.

Contacting the IRS for payment terms and some kind of arrangement would be best at this time.
Post Fri Apr 13, 2012 12:26 am
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coaster
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Why are your taxes so high? I can't fathom a single-income family having to pay that much in taxes. At typical tax rates net of the usual deductions and exemptions for a family a $10K tax bill would indicate income north of $100K.

~Tim~
Post Fri Apr 13, 2012 6:32 am
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kalsat
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I quit my job last year to relocate out of state for my husband's job. Part of the reason it's high is because the relocation package wasn't categorized as relocation and was reported as regular income.
Post Fri Apr 13, 2012 2:27 pm
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oldguy
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quote:
because the relocation package wasn't categorized as relocation and was reported as regular income.


Did you relocate from a foreign country? (domestic relocations don't cost that much?)
Post Fri Apr 13, 2012 4:17 pm
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eastmn
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Marketwatch Article Today:
Canít pay your tax bill? You have options

...
Post Fri Apr 13, 2012 11:20 pm
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coaster
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quote:
Originally posted by kalsat
the relocation package wasn't categorized as relocation and was reported as regular income.

Ouch. That hurts. Well, at least it's a one-time thing. Relocation expenses used to be deductible under certain circumstances; you might want to check if they still are. I've gotta think you're not taking advantage of all your legal deductions for your taxes to be that high. Taxes are really not that high these days if you know how to use the rules to best advantage.

~Tim~
Post Sat Apr 14, 2012 3:15 am
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eastmn
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Casualty and theft losses for any lost or damaged items during the move or during the year? Anything which was not covered by insurance, including the deductible. Medical works the same way.

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Post Sat Apr 14, 2012 9:32 pm
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clydewolf
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quote:
Originally posted by kalsat
I quit my job last year to relocate out of state for my husband's job. Part of the reason it's high is because the relocation package wasn't categorized as relocation and was reported as regular income.

Kalsat,

Most folks do not get a "relocation package" when they quit a job, regardless of the reason.

Is this your husband's relocation money that was categorized as regular income?

Moving expenses can be claimed as an Adjustment To Income on your 1040 line 26.
The moving expenses are first reported on Form 3903. The instructions for the form begin on page 3. http://www.irs.gov/pub/irs-pdf/f3903.pdf.

There are 2 tests that must be met.
1) Distance of the move, your new work location must be more than 50 miles from your old home than your old workplace.
2) You must work full time in the general area of your new workplace for at least 39 weeks during the 12 months right after you move.

Complete the form 3903 and file an amended tax return form 1040-X.
Form 1040-X = [url]http://www.irs.gov/pub/irs-pdf/f1040x.pdf
Instructions = http://www.irs.gov/pub/irs-pdf/i1040x.pdf
Post Mon May 28, 2012 12:37 am
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Postworker23
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The best what you can do is filling out your yearly tax form and submitted it to the financial authories. Every family member will get a tax free amount what will be deduced when they will calcuate the tax you need to pay. It can be possible to received too much payed tuch amounts back.
Post Wed Jun 13, 2012 9:39 pm
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