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Understanding IRS Tax Payment: What You Need to Know

Understanding Tax Payments to the IRS

IRS Tax Payment can sometimes feel like a confusing puzzle, and figuring out what you can and can’t deduct can be a real head-scratcher. In this article, we’re here to simplify things and answer a common question: Can you deduct your tax payments to the IRS? Let’s break it down in plain terms.

What's an IRS Tax Payment?

Imagine breaking down a big bill into smaller monthly payments – that’s how an installment agreement works. It’s like making gradual payments on a credit card. If you can’t pay your tax debt all at once, this can be a helpful option. The IRS is usually open to granting these agreements, making it a go-to choice for many.

Your Chances of Getting an Installment Agreement

If you owe less than $50,000 in taxes and are up-to-date with your filings, you’re likely to get an installment agreement with just a simple request. For higher tax debts, like over $50,000, you might need to provide more financial info, but you still have a good chance of approval. Remember, you’re not just paying off the original debt – interest and penalties (around 8-10%) are also part of the deal.

You have a say in how much you pay each month, so choose wisely. If your agreement gets the thumbs up, the IRS will want you to pay through payroll deduction or direct debit.

Can You Deduct Taxes and Interest?

One big question is whether you can deduct any part of your installment payments. Unfortunately, the answer is no. Unlike deducting mortgage interest or property taxes, you can’t deduct interest or penalties from your IRS installment payments. This is important to consider when deciding on this payment plan.

While federal taxes aren’t usually deductible, there’s an exception for self-employed folks. They can deduct a portion of self-employment taxes paid. But regular workers can’t reduce their gross income by paying their quarterly federal income taxes.

New Tax Rules for the Self-Employed

In 2018, tax rules changed for the self-employed. If you make up to $128,000, you’re subject to a 15.3% self-employment tax. For instance, with a $100,000 income, you’d owe $19,645 in taxes, best paid in quarterly installments of $4,867, without deductions. Also, the federal standard deduction went up to $12,000.

Penalties and Interest: No Deductions

The tax code says you can’t deduct penalties or interest from the IRS. Fines for violating laws aren’t deductible either, including penalties for misreporting income or claiming false tax deductions or credits.

Deducting Back Taxes and Tax Refunds

Yes, you can deduct state and local income taxes (SALT) for the current tax year, even if you’re paying them late. But you can’t deduct interest or penalties. For federal taxes, no luck – they’re not deductible.

Starting in the 2018 tax year, there’s a limit to deducting state and local taxes, set at $10,000 annually.

Conclusion

Don’t get lost in the tax maze. Understanding what you can and can’t deduct is key to making smart financial choices. While some payments might be deductible, others aren’t, like interest and penalties. Reach out to a tax pro to make sure you’re on the right track. Priority Tax Relief is here to help, offering expert guidance. Don’t let confusion hold you back – take control of your taxes today.

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FAQs

 The simple answer is no. A business and a person are completely separate, thus, any personal tax debts or liabilities should not affect your business.

Tax debt can be an exhausting and complicated thing to deal with on your own. Communicating with the IRS and professionally handling your tax liabilities are just two of the services companies like Priority Tax Relief can offer.

No. The IRS’s Innocent Spouse Relief protects you from paying these additional taxes. However, this does not relieve you from household employment taxes, business taxes, individual joint responsibility payments etc. Priority Tax Relief helps you learn more about innocent spouse relief.

The most popular option to date would be an Offer In Compromise (OIC). At Priority Tax Relief, we help tax relief help become more accessible to taxpayers in need and help them understand how they can qualify for these options.

IRS tax liens are legal claims on your property when you do not settle your tax debts. The IRS usually sends out a notice when no payment has been made after a liability assessment. Find out more about tax liens with Priority Tax Relief.

Yes. Not only can the IRS put a claim on all your current property, tax liens can also affect any property or intangible or tangible assets that you obtain in the future. At Priority Tax Relief, we help you understand federal tax liens and how to communicate with the IRS.

 

Tax levies are the actual seizure of your property and are different from legal claims or tax liens. Settle your taxes before the IRS sends out a notice. Priority Tax Relief helps you understand tax levies and how you can avoid them.

Yes. Not only can they seize physical property but they can also legally take hold of the money in your bank account and other wages. To avoid this from happening, contact Priority Tax Relief now.

Your debt will, unfortunately, continue to grow and you will possibly lose a great number of your assets. It is definitely a scenario we do not wish to see happen to anyone, that’s why Priority Tax Relief makes sure that our help becomes within reach.

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