Dee Dee Stone
Certified Public Accountant (CPA)
Dee Dee Stone is an experienced tax strategist, author, and public speaker. She holds both her bachelor’s and master’s degrees in accounting and has a diverse background in both public and corporate accounting. Ms. Stone provides helpful information for those with common tax-related questions faced by many people each year.
1. I owe a balance on my tax return. When do I have to pay it?
You must pay your federal income taxes on the April tax filing deadline, which is generally April 15th. It is important to note that you cannot file an extension to pay. Any payment made after April 15th is subject to late payment penalties and interest. However, you can file an extension of time to file using Form 4868. Form 4868 is simply an Application for Automatic Extension of Time to File U.S. Individual Income Tax Return.1 If you choose to file an extension of time to file, there is no penalty or interest-fee.
2. I can’t pay my tax balance in full. What are my options?
First, even if you cannot pay the entire tax balance, you want to be sure you still file your return by the April 15th deadline to avoid late filing penalties. Once you file your return, there are several options to pay your balance.2
If you think you can pay the full balance within 120 days, you may qualify for a 120-day full payment agreement.3 This agreement will give you 120 days to pay your balance in full without aggressive collection activity such as garnishment of your wages. Though late payment penalties and interest will continue to accrue until the balance is paid, there is no fee associated with this agreement.
If you think you cannot pay the full balance within 120 days, you may qualify for a monthly payment plan.4 You may apply for this monthly payment plan online if your balance is less than $50,000, or you may apply over the phone or by mail. However, the IRS charges a user fee depending on your chosen application method. Upon application, the IRS will determine your minimum monthly payment. From there, you can choose a higher payment amount, a convenient monthly due date, and a suitable method of payment.
If possible, it is ideal to accept the minimum payment but pay more than the minimum payment each month. By doing so, this will not only reduce penalties and interest, but will also keep your payment more manageable if you are low on funds.5
3. My divorce papers say I get to claim my child as a dependent every other year. This should be my year to claim my child on my taxes, but my ex already did. What can I do now?
Section 152(c)(4) of the Internal Revenue Code and IRS Publication 501 outline the rules for who can claim a child for tax purposes.6 The IRS does not consider your divorce papers in determining who can claim the child. Instead, the IRS first considers who the custodial parents (i.e., the parent with whom the child spent the greatest number of nights). If the child spent an equal number of nights with both parents, the IRS considers the custodial parent to be the parent with the higher adjusted gross income. If you have determined you are the custodial parent and thus eligible for the deduction, you should mail your return to the IRS for processing along with Form 886-H-DEP and any required supporting documentation as outlined on the form.7
4. I am selling my home. How much will I have to pay in taxes?
Many taxpayers do not face tax liabilitybecause Section 121 of the Internal Revenue Code provides an exclusion on the gain from the sale of your principal residence.8 To qualify for this exclusion, you must have:
(1) owned the home for two years;
(2) lived in the home for at least two of the last five years; and
(3) not excluded the gains from the sale of another home in the past two years.9
The amount excluded is $250,000 for individuals and $500,000 for married couples.10 Section 121 of the Internal Revenue Code also offers special rules for surviving spouses and other situations which may result in a partial exclusion, such as relocating for a job or health reasons.11
5. I received a notice from the IRS for a shared responsibility payment. What is this?
This is the penalty notice for not having the required health insurance for the given year.12 Section 5000A of the Internal Revenue Code outlines this penalty, as well as the administration and collections procedures for it.13 The IRS will send an annual notice of this balance until the amount is paid in full or until the time limit for collection has expired. Unlike a regular tax liability notice, the IRS is prohibited from filing liens or levies related to this penalty.14 In other words, it can only be collected by voluntary taxpayer payment or by withholding the amount from future refunds.
1 U.S. Department of the Treasury. Internal Revenue Service. (2018). 4868: Application for Automatic Extension of Time To File U.S. Individual Income Tax Return (Cat. No. 13141W). Retrieved from https://www.irs.gov/pub/irs-pdf/f4868.pdf.
2 I.R.C. § 6159(a) (2018).
3 U.S. Department of the Treasury. Internal Revenue Service. (2019). Topic No. 202 Tax Payment Options. Retrieved from https://www.irs.gov/taxtopics/tc202.
4 U.S. Department of the Treasury. Internal Revenue Service. (2018). 9465: Installment Agreement Request (Cat. No. 14842Y). Retrieved from https://www.irs.gov/pub/irs-pdf/f9465.pdf.
5 For more information about the collection process and various tax payment options visit https://www.irs.gov/newsroom/what-if-i-cant-pay-my-taxes.
6 I.R.C. § 152(c)(4); U.S. Department of the Treasury. Internal Revenue Service (2018). Publication 501: Dependents, Standard Deduction, and Filing Information (Cat. No. 15000U). Retrieved from https://www.irs.gov/pub/irs-pdf/p501df.
7 U.S. Department of the Treasury. Internal Revenue Service. (2018). 88-H-DEP: Supporting Documents for Dependency Exemptions (Cat. No. 35111U). Retrieved from https://www.irs.gov/pub/irs-pdf/f886-h-dep.pdf.
8 I.R.C. § 121(a) (2017).
9 I.R.C. § 121(b) (2017).
10 I.R.C. § 121(b)(2) (2017).
11 I.R.C. § 121(d) (2017).
12 I.R.C. § 5000A(b) (2019).
13 I.R.C. § 5000A(g) (2019).
14 I.R.C. § 5000A(g)(2)(B) (2019).