Are IRS Tax Penalties Deductible? Answers To This And Other Important Tax Questions!
As you prepare your annual tax return this year, you may run into some important tax questions. We’ve compiled a list of some of the questions we’re asked most often and provided answers so you can get a head start on your return.
Are IRS tax penalties deductible?
Tax penalties that have been issued by the IRS are never deductible. If you owe the IRS back taxes, you will likely also incur penalties and interest that unfortunately cannot be deducted. So, you are on the hook for these expenses. Your best bet to minimize these hefty penalties is to pay your tax debt as soon as you possibly can.
Can you negotiate a payment plan with the IRS?
While the IRS has a reputation for being intimidating and difficult to work with, you may be surprised to find that the IRS actually can be somewhat flexible (at times) and allow payment plans called installment agreements. You may be eligible to pay your debt to the IRS over time, rather than all at once.
How likely is it that I will be audited?
No one wants to receive the dreaded letter from the IRS indicating that you are going to be audited. Fortunately, your risk is actually very low. If you make between $25,000–$100,000/year, your risk is less than 1%. The more you make, the higher the risk that you could be audited. For example, if you make $1,000,000–$5,000,000, your audit risk is just over 5%. Still, not bad odds!
Is unemployment income taxable?
Yes, all kinds of income are taxable, including unemployment income.
What are the tax implications of taking money out of my retirement account early?
If you decide to take money out of your retirement before you retire, you will have to pay a 10% penalty on the amount that you withdrawal. In addition, it is considered income, so you will also be expected to pay income tax on the amount. It is also possible that the added income will put you into a new tax bracket.
I am self employed. Can I deduct any home office expenses?
The short answer to this commonly asked question is YES! If you deduct for your “home” office (or a room in your house), it needs to be used exclusively for work. You are also allowed to deduct office supply expenses, mileage, travel and software.
What is the age limit for declaring a child as a dependent?
There are limits to being able to claim your child as a dependent. Your child must be younger than 19 years old (or 24 years old if they are a student) at the end of the calendar year that matches your tax return. Your child must also be younger than you.
Success Tax Relief Can Answer All Of Your Tax Questions!
There are an unlimited number of questions that may come up as you start preparing your taxes for the year. Enlist the help of a tax firm that can review your return and answer any tax questions you might have to ensure that you’re not overpaying the IRS. Success Tax Relief does this for thousands of taxpayers each year. Give us a call today at 1-877-958-6638.