<p>I do our income tax- on my little laptop- with the help of a tx program. It is generally fairly easy, however as my eyesight has gotten worse- I have made mistakes when proofreading as numbers on the screen are difficult to read.</p>
<p>Anyway- about 5 years ago, I made a mistake on inputting our mortgage interest, I didn’t notice it because tax owed was in the usual ballpark.:o</p>
<p>So when the IRS noticed it a few months ago, they sent us a bill for the mistake & an additional penalty because of the length of time & the amount of the mistake.</p>
<p>I went back & agreed with their assessment & paid what was the equivalent of two months of before tax income ( we had to borrow to do so).</p>
<p>My question is- is there any possible place I can take off any of the interest/penalty or extra tax? ( or is there a place on FAFSA to do so?)</p>
<p>Interesting question. I wonder if it would be something you could ask for a special circumstances adjustment for. FAFSA reduces your available income in the formula by tax paid in the year on your tax return. I don’t think you would be able to show it anywhere on your 2010 return, but I wonder if it might be a special circumstance that the school could consider. Would seem logical to me, but I am not the govt, & govt logic and mine rarely synchronize.</p>
<p>I had a similar problem some years back when I overlooked a substantial interest amount. The penalty (on top of the interest I owed) was substantial. Aggravating. I understand the reason for the penalty being there, but I think it is gratuitous. </p>
<p>Remarkably, I then made a serious mistake in their favor two years in a row that caused me to double-count some income that was material. I only discovered it when a far-away state that I had some investments in tried to assert that I owed them (a nominal amount). I didn’t. However, in the course of reviewing my return, I realized the error with the feds, and filed amended returns that gave me a very nice refund.</p>
<p>It would be nice if the IRS used their “matching” ability to double check for taxpayer mistakes. I just made the deadline for filing the amended returns. </p>
<p>I think you can deduct your interest, but not your penalty, although I’m not certain of it.</p>
<p>emeraldkity (and possibly dadx) - This doesn’t apply to FAFSA, but did you know that if you commit an unintentional error on the return, you may be able to show that you were acting “in good faith” or had “reasonable cause” to do what you did on your tax forms. You then might be able to have the penalties (and possibly even the interest) waived.</p>
<p>" For example, an honest misunderstanding of fact or law, an isolated computational error, reliance on professional tax advice, or reliance on information returns all indicate reasonable cause/good faith. However, if the taxpayer should have known better, the defense will not apply." [Tax</a> Relief Blog: IRS Audits: June 2010 Archives](<a href=“http://blog.myirstaxrelief.com/irs-audits/2010/06/]Tax”>http://blog.myirstaxrelief.com/irs-audits/2010/06/)</p>
<p>Since this is a tax topic, I was wondering if anyone has tax software or a tax filing website that has been updated with the late 2010 tax changes.</p>
<p>There is a link on the FA forum to an IRS page where it says that anyone affected by the late tax bill will not be able to file until mid to late feb as the IRS will not be ready. The softwares may be getting caught up but I imagine they can’t be finalized until the IRS have finalized their publications.</p>
<p>I had a look at the IRS website and it doesn’t look like they’ve updated anything for the late 2010 tax changes. There is a nice notice that they have updated forms for 2009 though. I would have expected the IRS to have forms prepared both ways but I guess that was too much to expect.</p>
<p>I just wanted to get a head start on my 2010 tax liability - FA isn’t an issue for us.</p>
<p>EK- are you sure it was 5 years ago? Only 3 years are “open” (available for them to review), unless you underreported >25% of your income. Until April 15, 2011, 2007, 2008 and 2009 are open.</p>
<p>Penalties are never deductible. Federal taxes are not deductible on the federal return. Mortgage interest is, and investment interest can be. I would ask for special circumstances review with the individual school regarding the FAFSA issue.</p>
<p>As someone else said, the IRS is often good about removing penalties when there is just cause. They almost never remove interest if the error is taxpayer fault. </p>
<p>Write a letter, making sure you reference your names, SSN, year in question, and any locator numbers on your IRS notice. Include a copy of the notice and a copy of your check. Explain exactly what happened, and that it was an unintentional oversight, you apoogize, won’t happen again, etc. Ask that they remove and refund the penalty. They often do. Keep copies of everything in case you need to send it again (happens…)</p>
No there isn’t. Have no dea about FAFSA though. But neither the interest/penalty or extra tax is deductible anywhere. If Bookworm’s accountant deducted either one of those, he needs a new accountant.</p>
<p>
The IRS can only match information it receives from a third party. They get a 1098 from the mortgage company so they know how much interest you pay. They do not receive anything from your property taxes, for example. If you put extra income on your return, how do they know you didn’t actually get it? And no, you cannot deduct your interest. As Srtstress pointed out, only qualified home mortgage interest and investment interest may be deducted.</p>
<p>Right. My bad on the interest. I keep forgetting some of the changes over the years.</p>
<p>As far as the matching, in the case I cited, they had the info. Of course it was my own fault for not triple checking, but I usually have a tax bill thats of outlandish magnitude so I’ve become used to shrugging and just paying.</p>
<p>but did you know that if you commit an unintentional error on the return, you may be able to show that you were acting “in good faith” or had “reasonable cause” to do what you did on your tax forms. You then might be able to have the penalties (and possibly even the interest) waived.</p>
<p>The way I read the form, if you admitted you made the mistake/error whether intentional or not, you had to pay it & the way they said that after consideration you may have to pay an even higher tax + penalties, it scared me off!</p>
<p>It would have been really * dumb* of me to have done it on purpose- as I am fully aware of the bank sending the mortgage info to the irs- perhaps I should have spent a few more minutes and had our bank info automatically inputted into the tax forms- I used intuit I think at that time- and ran it through the error/audit checker without a problem.
( it also wasn’t quite 5 years ago- I double checked & it was 2007- it just * seems* like 5 years)</p>
<p>My bifocals don’t work for crap- unless I hold my head like a giraffe & still I can’t read that great on the monitor- I keep meaning to get a bigger one, but waiting for prices to come down.</p>
<p>I use terminal glasses for work on monitors. I also have reading glasses for books, papers and the iPad and bifocals in the car. I hate using the bifocals on computer screens.</p>
<p>I am so nearsighted ( -10.00 both eyes), that reading glasses alone aren’t strong enough- even if I use my contacts & then reading glasses.
My direct/center vision seems to be the worst, I guess I could sneak up on my laptop and look out of the corner of my eye!</p>
<p>EK - I’ve been borrowing money to pay taxes for the last 3 years. It’s a bit complicated, but it’s on business income that I didn’t receive. I wrote a letter explaining the circumstance and the relevant business tax forms showing the phantom income. Most schools chose to not consider what was in the letter, 2 did give me a better financial aid package. I do my own taxes and am usually terrified of making such a mistake as yours. I guess not terrified enough that I pay someone else to do my taxes I have found that HSA accounts are very confusing. Some tax break they are as I did have to hire someone to straighten out a HSA mistake.</p>
I have found that HSA accounts are very confusing. Some tax break they are as I did have to hire someone to straighten out a HSA mistake.</p>