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We had cashed in two IRA accounts totaling $279,000.00 to purchase

Customer Question
a retirement home . We...
We had cashed in two IRA accounts totaling $279,000.00 to purchase a retirement home . We thought we would just have to pay a penalty of 10% however it turns out we do not but have to claim the amount as income so now we have to owe IRS approx $90,000.00 As it turns out we are in he process of selling our current home but have not been successful our contract if up; 4/19..so I thought we could get a home equity but not till the 19th.. Can we get a payment plan or something till we can get a home equity loan? Any suggestions? Also my husband is umemployed total income 48,000 for me and his is 31000.00
Submitted: 7 years ago.Category: Tax
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Answered in 4 minutes by:
4/1/2010
Tax Professional: Merlo, Accountant replied 7 years ago
Merlo
Merlo, Accountant
Category: Tax
Satisfied Customers: 9,783
Experience: 25+ years tax consulting. Specializing in returns for US citizens living abroad
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Hello JA Customer,

 

Yes, you can try to set up a payment plan with the IRS to pay off these taxes, and then you would simply pay off that plan in full once you sell your home.

 

I would also suggest that you file for an extension to file your return. You can file for an extension which would give you an extra six months to pay the taxes due, as your filing deadline would be extended to October 15th instead of April 15th. You may even have your home sold by then and would not have to worry about trying to set up a payment plan.

 

An extension is filed on IRS form 4868.

 

 

Thank you JA Customer

 

 

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Customer reply replied 7 years ago
If I file for an extension as you suggested I heard that you would still need to pay your taxes is this true? please elaborate about filing an extension.
Tax Professional: Merlo, Accountant replied 7 years ago

Hello again JA Customer,

 

Yes, it is correct that when filing for an extension you should still try to pay in the taxes that you think you will owe. However, if you do not have the money to do that, all this will mean is that the amount you do owe will continue to accrue interest. But that would be the case even if you file now.

 

The only reason I am suggesting you file for an extension is that it gives you an extra 6 months time to see if your house sells, and then you would not have to fool with setting up a payment plan. You would of course pay any interest on the taxes owed between April 15th and the time you file, but that would be the case even on a payment plan. So I am just suggesting this as a mean of avoiding some extra steps here in setting up a payment plan if you don't need to.

 

 

Thank you JA Customer

 

 

Merlo
Merlo, Accountant
Category: Tax
Satisfied Customers: 9,783
Experience: 25+ years tax consulting. Specializing in returns for US citizens living abroad
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