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Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 29535
Experience:  Taxes, Immigration, Labor Relations
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Over the last 6 months of 2012, I took monthly premature distributions

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Over the last 6 months of 2012, I took monthly premature distributions from my traditional IRA amounting to $114,800. I am 55 years old, worked as an expat overseas last year and need to file an extension for my Federal and Virginia tax returns today. I did not pay the 10% penalty on the $114,800 last year nor have I paid income taxes on this amount. I am better off to go ahead and write a check to the IRS today for the 10% penalty plus the estimated taxes owed ($11,480 + $26,000) and send it with my extension forms? If I don't send the check today, will there be further penalties?

LEV :

Hi and welcome to Just Answer!

Customer:

Hello Lev

LEV :

Hi and welcome to Just Answer!
You are correct - you need to send your payment today if you want to avoid penalty.
If you already prepared your tax return - you may simply file it today - and would not need any extension. That is an extension to file your tax return - not to pay your tax liability.

LEV :

You would need to request an extension ONLY if you are not able to file today.

Customer:

Because I worked overseas as an expat employee, I need to file an extension to pay my taxes.

Customer:

So when I file my extension with the IRS and the State of Virginia, I need to estimate the taxes to be paid and send them checks?

LEV :

If you are abroad - you do not need to request extension.

Customer:

Does the 10% penalty go the IRS only (not the State of Virginia)

Customer:

I am back in the USA now.

LEV :

Still you need to main your payments.

LEV :

Only to the IRS - it is added to your total tax liability on your tax return.

Customer:

"main your payments"?

Customer:

OK

Customer:

What about Social Security on this $114,800, do I need to pay that, too?

Customer:

Hi Lev. Are you still there?

LEV :

There is NO social security tax on IRA distribution.

Customer:

Good news....

Customer:

What is the additional penalty if I did not send this check tonight?

Customer:

roughly...

LEV :

Penalty is 1/2% per month - up to max 25%.
Plus interest - current rate is 3%.

Customer:

If I send the extensions to the IRS and Virginia with two checks dated April 15, 2013 does this meet their deadline criteria?

Customer:

OK

Customer:

If I mail the extensions to the IRS and Virginia tonight with two checks dated April 15, 2013 does this meet their deadline criteria?

Customer:

Lev, you still there?

Customer:

Should I send two separate checks to the IRS: one for the 10% penalty and one for the estimated taxes on the premature distribution?

LEV :

Be sure - the Post Office will stamp on enveloped as send today. That will be OK.
Sorry not able to type faster.

Customer:

I appreciate you!

Customer:

What about my last question on two checks?

LEV :

To your state - send another check - no penalty - just income taxes.

LEV :

No need two separate checks to IRS - ONE check - in memo put tax year 2012 and your SSN.

Customer:

So the IRS will figure out that my check includes both the 10% penalty and my estimated taxes?

LEV :

That you will calculate your ordinary income taxes and penalty on your tax return. There is nothing for the IRS to figure out.
They will only care if you paid on time or not.

Customer:

OK. Final question, what is the right form to print fill out and mail to the IRS for tax extensions?

LEV :

The penalty for filing late is usually 5 percent of the unpaid taxes for each month or part of a month that a return is late. This penalty will not exceed 25 percent of your unpaid taxes.


If you file your return more than 60 days after the due date or extended due date, the minimum penalty is the smaller of $135 or 100 percent of the unpaid tax.


If you do not pay your taxes by the due date, you will generally have to pay a failure-to-pay penalty of ½ of 1 percent of your unpaid taxes for each month or part of a month after the due date that the taxes are not paid. This penalty can be as much as 25 percent of your unpaid taxes.


If you request an extension of time to file by the tax deadline and you paid at least 90 percent of your actual tax liability by the original due date, you will not face a failure-to-pay penalty if the remaining balance is paid by the extended due date.

Lev and other Tax Specialists are ready to help you