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My strong recommendation would be to stay away from your Retirement Account
Make an arrangement of monthly payments to the IRS
That would be overall, less expensive then the loss of interest and gains on your Retirement
IRS is correct, they will not accept any settlements but they will accept a waiver of penalties if you arrange a payment plan.
Have you file your 2010 taxes yet?
But paying your IRS bill is consider an emergency need but you will be taxed on your IRA if it's a regular IRA and a 7 as a distribution
I have filed. I understand that no one thinks I should use retirement but I don't make enough in unemployment to make payments to the IRS. The retirement penalty is a one time 10% fee but the IRS charges 6% interest and .25% late fee each month. It would take me 10 years to pay off the $19,000 even if there was no interest or late fee. I would never be able to pay it off. I was also told by IRS employee that they would not accept a payment arrangement since I have the money available in my IRA.
Have you tried to consult with a tax attorney? I just can't see how they would ask for your retirement when you have been unemployed for a long period of time. True you will get hit with a 10% penalty and again when you file taxes in 2011 because it will be considered an income. Sometimes if you talk to another IRS agent... you may get a different reply. I know I have negotiated for my clients. It's very difficult to try to get money back into retirement once it's gone.
I would say, no to waiting for a Levy.
Do you know how much time you have left on your unemployment?
I have not consulted an attorney. I just got a 12 week extension on my unemployment and that may be my last extension.
you said it would be considered an emergency. How do I go about avoiding the penalty? Is this addressed next year when I file my 2011 taxes?
Ouch, well if you feel it's worth it to you to get the perverbial monkey off your back, then you have to take the hit one way or the other... Did you have a tax preparer do your taxes for 2010 or did you self prepare?
I had a tax preparer but he just left me on my own to deal with the IRS. I just don't know where to go from here. I went to the IRS yesterday but was given little assistance outside of being told that I had to use my retirement to pay.
You know what, I was re-reading your question again... I, myself would wait for the Levy because who knows what the future holds. It will take the IRS quite awhile to do it. You may find a job, or something will come your way that will help in the situation.
As for the tax preparer, were they an individual or a company like H & R ?
But there is no form to waive a penalty if you pull it out, but I think if they levy, you also won't receive a 1099 on the distribution as an income as well
Whereas if you pull out, you will get hit with the 10% plus you will receive a 1099-R at the end of the year to claim as an income.
In Summary: If I wait for a levy it will save me the 10% penalty and taxes on the $19,000 for next year? I will have to endure the stress but can save $ in the long run.... Do I contact the IRS to tell them I can't pay or do I wait to hear from them when they don't get a check with the income tax filed?
Correct in your summary.
and yes if it were me, I would wait for them to come to me. You will get letters and if I were you, make arrangements through the mail. Send 50.00 bucks
My question is, did your preparer make an error?
Maybe you should have your taxes "reviewed"
H & R Block, I think still offers "second looks" with out a charge. I know I do
Also, on my website I have a lot of links that may answer some of your questions
You can click under the Financial Links as well.
Now if there's an error with your taxes, and amendment can be filed to correct the matter.
Have you created any "self employment?"
Like a cleaning company or some type of service that you started in 2010?
I did a short sale on an investment property. I received two 1099's for a substantial amount of $. I don't think there was an error as I was expecting to pay around $20,000. I used an individual in another state who has done my taxes in the past. I have not created any self employment. I expect I will have work in the near future but I will never make the kind of money I used to make. I will try to wait for IRS to contact me.
I strongly recommend a second look at your taxes
it's not adding up in my head as to the issue... if you short sale the home and it was owner occupied you should not be paying any taxes on it
There's not State Income tax in Fl since I have quite a few clients in Fl
You want a Sr. Tax preparer with 5 plus years experience with H & R... and I'm not pushing H & R but the people there don't get paid much, but they do have a sincerity in helping those who need help
ok. I'll look into contacting someone. The property was not owner occupied. It was an investment. Should I see a tax attorney or a CPA? I just moved from CA to FL but I didn't owe tax to either state. It was all federal.
Tax Attorney are only good when you have an issue in the legal realm, they are not up-to-date on the tax forms as they are on Tax Law. A CPA is good, but are expensive... Jackson Hewett... I have no idea... H & R I only know... Liberty Tax (Stay Away)
Even Non-Owner Occupied you should be able to get out of it.
If you were filing a Schedule E, you can calclulate your expenses to maintain... but I would "revisit" the issue, I'm feeling that the tax preparer made an error
I will go to H&R but is it too late since the taxes have already been filed?
No, never too late
It's okay if it's file, because once processed, you can do a 1040X and make the necessary correction if need be
Thanks. I'll contact someone now.
ok, I wish you the very best... and the best way are to take the taxes that have been filed with all of your supporting info, go in or call and say you need a 2nd look on your return. You want someone with experience with Schedule E and Short Sale Issues...
I have a question
Did you receive a 1099-c or 1099-a ?
on the property?
One is a 1099c for $26,506 the other is a 1099c for $62,363.
1st and 2nd?
The house was in what state?
It was a condo in FL. I lived in CA until a month before it sold (when I moved to FL). I never occupied the property
Was the 1st and 2nd combined used to purchase the condo?
Yes. I was very busy with work at the time and didn't realize I was getting a 2nd mortgage that was adjustable. My bad. My fault. Stupid.
So it appears to me that the 2nd got nothing and the first was shorted of 26,506
Well, in my opinion I don't think you should have to pay... You couldn't occupy the home do to work took you to another state anyway
I would try to get this wiped out
The second settled for $4000. I paid $142,00 for the property originally. Both banks bought the loans from banks that went under so they didn't really lose anything.
OK, so do the second look by someone who is an expert in this area or a CPA but if you are able to wipe this out and it takes a CPA or a little expense to get it done, it will be well worth it.
But in all cases do your best to stay away from the Retirement because it's cost you greatly in the Long Run for a long period of time.
Thanks for you help. I SINCERELY XXXXX XXXXX can get it wiped out. I went from 6 figures to nothing. I have been wiped out except for retirement.