I made a mistake in 2015 and didn't roll over a 401K within the deadline window (but thought I did) and now I'm on the hook for over $5K (and climbing).
Unfortunately I took major pay cut in 2015, 2016, and another this year, so my income is about 40% of what is was in 2013, and I just simply don't have the money to pay them this year. Anyone have any luck getting a tax debt deferred or reduced? I feel like I'd be better off owing "Vinnie Da Knife" than the IRS since they have so many ways to screw you.
Anyway just stressing out here with terminally ill family member and lots of related expenses.

There is an IRS form to ask for mercy.

It might not work, but it might be worth a try. Maybe you want to check with a tax professional first.

quote:

Originally posted by CaptainMike:
I made a mistake in 2015 and didn't roll over a 401K within the deadline window (but thought I did) and now I'm on the hook for over $5K (and climbing).
Unfortunately I took major pay cut in 2015, 2016, and another this year, so my income is about 40% of what is was in 2013, and I just simply don't have the money to pay them this year. Anyone have any luck getting a tax debt deferred or reduced? I feel like I'd be better off owing "Vinnie Da Knife" than the IRS since they have so many ways to screw you.
Anyway just stressing out here with terminally ill family member and lots of related expenses.

The "But thought I did" needs to be expanded upon. What were the circumstances that caused you to fail to meet the deadline and what makes you think you met the deadline?

I forgot to pay on a stock sale about 3 years ago. they sent a letter 1.5 yrs later asking about it and wanting their cash. I went online and set up a payment agreement. They deduct $X from your checking account every month until it all gets paid off. It was fairly painless.

quote:

Originally posted by Sailor1911:


The "But thought I did" needs to be expanded upon. What were the circumstances that caused you to fail to meet the deadline and what makes you think you met the deadline?

I work offshore as a Merchant Mariner on a rotating schedule 28/28, 28/14, 60/30 etc. I rolled the money over between hitches offshore during the same timeframe we had our preemie daughter. The whole period was kind of a blur, but I went 68 days before rolling over the money because I mistook the date of the disbursement from TIAA CREF, and I was deployed offshore when the window closed. I didn't realize I missed it at the time.
The IRS was kind enough to inform me just this week. Of course I now also have missed the deadline to respond/pay since I was offshore when they sent the notice to my house (My wife was out of state with the kids taking care of her mother). So now I'm trying to get an extension.

It is worth speaking with a CPA, however the IRS typically makes no exceptions on missing deadlines to roll over funds. Sadly, they seem pleased when you have made an error with retirement funds and they get to tax the money.

As far as getting more time to pay, that is usually not a problem. They will of course levy penalties and charge interest. It is important to communicate clearly with them. In my opinion it is worth several hundred dollars to pay a CPA to handle this for you.

We all make mistakes, and sadly the IRS often profits from them.

quote:

I made a mistake in 2015 and didn't roll over a 401K within the deadline window (but thought I did)

It is worth a double check. I find errors in reporting by fund managers all the time. Once, BOA screwed up a rollover date for a client & it took 2 years to fix.
Installment agreements are easy & payment can be spread over 60 months- https://www.irs.gov/individual...greement-application. As VTail pointed out you can ask for a penalty abatement. A letter will suffice to the CP2000 address. It is unlikely the 10% penalty will be abated, but the additional failure to pay penalties will be abated. You may email me if you wish, I am a CPA, retired but still keep a small tax practice & an active license. I enjoy fighting IRS when I can.

Thanks for the replies everyone. I have an uncle who is a semi-retired CPA who is drafting a letter for me to attempt to reduce the penalties. Unfortunately it looks like the rollover date problem was my my fault. The error also upped my marginal rate so we are possibly going to refile if I can find some more deductions. I usually leave a bit on the table and don't stretch for every deduction I can get as Merchant Mariners have been on the "Dirty Dozen" list for a long time and we get audited frequently. No more though, I will take every damn penny I can get going forward.

You can set up a payment plan. Due to some unforseen circumstances I had a rather larger tax bill one year I was unable to pay off at once. I set up a payment plan and if I followed the plan I was eligible for relief from the interest and penalties.

quote:

Originally posted by CaptainMike:
Thanks for the replies everyone. I have an uncle who is a semi-retired CPA who is drafting a letter for me to attempt to reduce the penalties. Unfortunately it looks like the rollover date problem was my my fault. The error also upped my marginal rate so we are possibly going to refile if I can find some more deductions. I usually leave a bit on the table and don't stretch for every deduction I can get as Merchant Mariners have been on the "Dirty Dozen" list for a long time and we get audited frequently. No more though, I will take every damn penny I can get going forward.

Given your inaccessibility for lengthy periods of time, offshore, you may have grounds for a "Reasonable Cause" argument for penalty abatement. Failing that, the IRS has a "First Time Abatement" program that you should be able to fall back on provided you have a clean penalty history in your dealings with them. IRS was chastised a few years back for not telling taxpayers for a long time that this FTA program existed - speaks to "I'm from the IRS and I'm here to help".

Also, the relief from penalty on missed rollover deadlines is more liberal that is has been in the past so have your uncle do some research to see if he can find some relevant case law, private letter rulings or other authority for an argument for penalty relief.

Good luck with it, Cap.

They may abate the penalty.

If your question is just about payment, they will certainly enter into an installment agreement with you and you can pay it out over time.

When you talk to your uncle, make sure to figure out the plan on how to get the money out of the IRA in the future. I don't know the rules in this area. Ask your uncle to determine if you have an excess contribution.

This was really more of a "Hacked off? Pitch your bitch!" kind of post. Just the last thing I needed right now. Even though it was my fault under the existing rules. The rules are stupid and I pay an excessive (IMO) amount of taxes already anyway. $30-40K yearly just in Fed Income Tax. Though the past two years it has been much less, and in fact this year I may wind up paying almost nothing due to making so little money. Somebody else will have to take over keeping Shaneeqqea'a 's 6 kids in diapers and Purple drank.