Ask Me Help Desk - What to do about receiving a bill from IRS?

I just received a bill from the IRS saying that my husband and I owed $1,607. I did not file my income last year, I was a waitresss and they did not take any federal or state income tax. I earned around $5,400, We have 2 children and my husband made about $36,000, we also claim my Mom as a dependent,The letter also stated that my husband did not file a state return in 2007 and put an amount of $810 , we did file his state return and got a rebate, my question is how can we owe the IRS this much on that small of an amount and can I amend the taxes and re file, how do I dispute the state charge? Any info would be great, we do not have the money to pay them the $1,607, any options and how can we fight the amount due?

Call and talk to them, provide them with all the documentation of paying your taxes on your family income.

Was your earnings included with the family income ?

There is no need to refile your taxes. What you do is review each item that the IRS talks about in their notice, get your records together, and decide if you agree with the IRS or not. If you disagree with them you indicate that on the form that they ask you to return, and write a letter that explains why you disagree. In your letter be as specifc and detailed as you can. Attach copies of any documentation that backs you up. If you agree with the IRS on any items, then indicate that in the letter and include a check for the proper amount. The longer you wait to pay the portion that is legitamite the more you will ultimately owe in interest charges.

It sounds like they are aware of your waitress income, and so the fact that you neglected to include your income when you filed your taxes is a problem. Second, it seems that you listed income tax paid to the state as a deduction, and the IRS is either saying that the income tax was never paid or the wrong amount was reported, so they are denying the deduction which raises your federal taxes. Also, remember that just as state income tax paid is a deduction, if you itemize then any refund you get from the state must be reported as income - could it be that you received a refund in 2007 that you didn't report as income?

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Originally Posted by Fr_Chuck

Call and talk to them, provide them with all the documentation of paying your taxes on your family income.

Was your earnings included with the family income ?

No my income was not icluded this was due to my mistake, my employer told me I did not make enough for them to take out any federal or state, so I just thought that I did not need to file that, big and dumb mistake I know, but that fee is way too high!

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Originally Posted by ebaines

There is no need to refile your taxes. What you do is review each item that the IRS talks about in their notice, get your records together, and decide if you agre with the IRS or not. If you disagree with them you indicate that on the form that they ask you to return, and write a letter that explains why you disagree. In your letter be as specifc and detailed as you can. Attach copies of any documentation that backs you up. If you agree with the IRS on any items, then indicate that in the letter and include a check for the proper amount. The longer you wait to pay the portion that is legitamite the more you will ultimately owe in interest charges.

It sounds like they are aware of your waitress income, and so the fact that you neglected to include your income when you filed your taxes is a problem. Second, it seems that you listed income tax paid to the state as a deduction, and the IRS is either saying that the income tax was never paid or the wrong amount was reported, so they are denying the deduction which raises your federal taxes. Also, remember that just as state income tax paid is a deduction, if you itemize then any refund you get from the state must be reported as income - could it be that you received a refund in 2007 that you didn't report as income?

It just says on the paperwork State Income tax refund 816, amount reported to the IRS, and a 0 Amount included on your return, I did turbo tax last year and followed all instruction, I just did not report my wages, you are probably in the right direction though, I just got tired of paying someone over $300 to do our taxes, and the ecomomy is so bad and as a waitress, I at least have to claim minimum wage, but some nights I am not even making that,I do not know what to do, we do not have the money to pay that amount, with a family of 4 , 5 including my Mom who has no income at all, how can they expect us to have that much money, can they just take it out of our refund this year? Plus I think the numbers are wrong, how can a tax on $6,678 be $1,673

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Originally Posted by enjlankford

It just says on the paperwork State Income tax refund 816, amount reported to the IRS, and a 0 Amount included on your return

Right - whenever you get a refund from the state you must include it as income, if you itimized deductions.

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Originally Posted by enjlankford

Plus I think the numbers are wrong, how can a tax on $6,678 be $1,673

In your bracket the tax on $6678 should be 15%, or about $1000. The additional $673 could be interest and penalties, but it sounds high - did the IRS include a calculation of interest and/or penalty charges in their notice to you?

The letter they sent you should tell you what to do if you can't pay the bill all at once. They can work out a repayment schedule with you, which could include using your 2008 refund as a partial payment.

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Originally Posted by enjlankford

my employer told me I did not make enough for them to take out any federal or state,

That may be true, but it does not mean you don't have to pay taxes. I suspect you filed a joint return, which means your income is lumped in with your husband's to determine total tax liability. So, between you and your husband, you made over $41K. So your total tax liability will be based on that. Also, since your occupation was waitress, there is an assumption of tips that the IRS may be figuring into the mix.

So I agree with ebaines. You need to assemble all your documentation, then request a meeting with an IRS agent and explain to them that you misunderstood the tax regs and are prepared to pay what you actually owe, but you need to set up a payment plan once the actual amount is determined.

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Originally Posted by ScottGem

That may be true, but it does not mean you don't have to pay taxes. I suspect you filed a joint return, which means your income is lumped in with your husband's to determine total tax liability. So, between you and your husband, you made over $41K. So your total tax liability will be based on that. Also, since your occupation was waitress, there is an assumption of tips that the IRS may be figuring into the mix.

So I agree with ebaines. You need to assemble all your documentation, then request a meeting with an IRS agent and explain to them that you misunderstood the tax regs and are prepared to pay what you actually owe, but you need to set up a payment plan once the actual amount is determined.

Thanks for the advice, I am just going to put in on our credit card and pay it off when we receive our refund next year, seems most logical thing to do, what if they find errors they made? Will they refund me or is that a joke, I just hate this is happening now, We have our property taxes of $1789 due dec 31, all this is stressing me out , it is Christmas, I am back in school part time, working part time, taking care of 2 kids my mom and running the house, lol , got to love the IRS, Death and Taxes, Thanks to all!

I wouldn't give it up completely. You may be able to knock down the amount you owe considerably by correcting the mistakes. Despite their rep, the IRS really doesn't want to gouge taxpayers who just made mistakes. They WILL work with you to make sure the correct amount is calculated. They may even be willing to settle for a smaller amount.