IRS charging $7k in taxes - Need Assistance with Unexpected Tax Bill
So I'm pretty sure this has been asked a million times before but here goes... My husband and I got married in 2020 and for the second year in a row we're having serious tax problems. This year when I entered my W-2 into the tax software, I was supposed to get a small refund, but as soon as I added my husband's W-2, suddenly it says we owe over $7,000 to the IRS! I nearly had a heart attack. After reviewing our W4 forms, I realized neither of us had checked the box indicating that we both work. We both did select to have additional withholding taken out of our paychecks, but apparently it wasn't nearly enough. We've already fixed our W4s for this year, especially since we also had a baby last year. The problem is we absolutely don't have $7k sitting around to pay the IRS. Between the two of us, we already had over $9,500 withheld from our paychecks for taxes, and now they want ANOTHER $7k? This can't be right. Any advice on what to do? We're completely overwhelmed.
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Kayla Jacobson
This is actually a pretty common situation, especially for dual-income married couples. The tax system isn't very intuitive about this. When both spouses work, you often need significantly more withholding than you might expect. What's happening is that each of your employers is withholding as if that job is your only income, but when you combine both incomes on your joint return, it pushes you into a higher tax bracket. Without that "both spouses work" checkbox or extra withholding, you end up with a surprise bill. For the current situation, don't panic about the $7k. The IRS offers payment plans that are pretty reasonable. You can set up an installment agreement online through the IRS website. The standard plan allows you to pay over 72 months with a relatively low setup fee. Interest will accrue, but the rates aren't terrible. Going forward, your updated W4s should help prevent this from happening again, especially if you indicated your dual-income status and added extra withholding. And congrats on the new baby - that should help with your tax situation through the child tax credit!
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Hannah Flores
•Thank you so much for explaining this. We really didn't understand what was happening. How much does the IRS charge in interest and fees for a payment plan? And is there any way to negotiate the amount down at all?
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Kayla Jacobson
•The IRS interest rate changes quarterly and is currently around 6-7%. There's also a failure-to-pay penalty of 0.5% per month (up to 25%) on the unpaid balance, but this is reduced to 0.25% when you're on a payment plan. Unfortunately, the IRS generally doesn't negotiate the tax amount itself unless there's an actual error in the calculation. What you might qualify for is an Offer in Compromise if you truly can't pay the full amount, but these are difficult to get approved and require proving significant financial hardship. For most people with steady income, a payment plan is the most practical solution.
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William Rivera
I had almost this exact problem last year! I was freaking out about owing $5,200 to the IRS that I definitely didn't have. I tried calling the IRS for days and couldn't get through. Then my sister told me about this service called taxr.ai (https://taxr.ai) that helped her figure out payment options. I uploaded my tax documents and it analyzed exactly what went wrong with our withholding and showed me all my payment plan options. It even calculated how much I'd pay in interest with different payment timeframes. Saved me so much stress and probably thousands in penalties because I was seriously considering just not filing at all (terrible idea, I know now). The best part was they showed me that I qualified for a first-time penalty abatement which saved me over $800! I had no idea that was even a thing. Definitely worth checking out if you're in this situation.
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Grace Lee
•How does it work exactly? Do they connect you with real tax professionals or is it just software? I'm in a similar situation but worried about sharing my tax info with some random website.
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Mia Roberts
•Does this work if you're self-employed too? My withholding situation is way more complicated because I have both W-2 and 1099 income. Those estimated quarterly payments are killing me and I always seem to still owe at tax time.
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William Rivera
•It's an AI tool that analyzes your tax documents and situation. It doesn't just give generic advice - it actually looks at your specific numbers and tax history. Very secure too - they use the same encryption as banks. Yes, it absolutely works for self-employment situations! That's actually where it really shines. It can help you calculate the right quarterly estimated payments based on your combined W-2 and 1099 income so you don't end up with a surprise bill. It even helps identify deductions you might be missing as a self-employed person.
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Grace Lee
Just wanted to update that I tried taxr.ai after asking about it here. Honestly was skeptical but it really helped me understand my options with the IRS. I had a similar situation owing about $4,600 from last year and freaking out. The system analyzed my tax history and showed me I qualified for a payment plan with just $76/month which was totally doable for me. It also helped me adjust my withholding for this year so I won't have the same problem again. They have this calculator that shows exactly how much to withhold when you have multiple jobs or both spouses working. Really grateful I found this before I got into even more trouble with the IRS. Now I actually understand how the withholding system works instead of just guessing and hoping.
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The Boss
Hey, if you need to actually talk to someone at the IRS about your payment options, check out Claimyr (https://claimyr.com). I was in a similar situation owing $8k+ and desperately needed to talk to an actual human at the IRS. After waiting on hold for 3+ hours and getting disconnected twice, I found Claimyr and they got me connected to an IRS agent in like 15 minutes. You can see how it works here: https://youtu.be/_kiP6q8DX5c The IRS agent helped me set up a payment plan where I only have to pay about $150/month. Completely manageable compared to the full $8k I was panicking about. Plus they waived some penalties since it was my first time with this issue.
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Evan Kalinowski
•Wait, so you pay a service to call the IRS for you? Couldn't you just keep calling yourself? I don't get how this works or why it would be faster than just calling directly.
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Victoria Charity
•Sorry but this sounds like a scam. Nobody can magically get through to the IRS faster. I've been trying for weeks and it's impossible. How would some random company have a special line to the IRS?
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The Boss
•Claimyr doesn't call for you - they hold your place in line using their system. When they're close to an agent, they call you and connect you directly. It's your phone number that shows up to the IRS, and you do all the talking yourself. I was skeptical too! But their system basically navigates the IRS phone tree and waits on hold so you don't have to. The IRS doesn't give them special access - they just have technology that keeps your place in line. I wasted almost 9 hours trying to get through on my own before using them. With how much I make hourly at work, it was actually cheaper to use the service than to sit on hold all day.
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Victoria Charity
Coming back to say I was completely wrong about Claimyr. After getting disconnected AGAIN after waiting 2+ hours on hold with the IRS yesterday, I was desperate and decided to try it. Sure enough, I got a call back in about 20 minutes saying they had an IRS agent on the line. I was connected immediately to a super helpful agent who set up my payment plan. The whole thing took maybe 30 minutes total instead of the entire day I had set aside to deal with this. The agent also told me about the first-time penalty abatement I qualified for since I had a good compliance history, which saved me over $500. Should have done this weeks ago instead of stressing out and wasting hours on hold.
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Jasmine Quinn
Have you checked if you qualify for an Offer in Compromise? If you truly can't pay the full amount, sometimes the IRS will settle for less. You have to prove financial hardship though. Also, double check your return for errors. Sometimes software makes mistakes with credits or deductions, especially with the child tax credit in your situation. Might be worth having a professional take a quick look.
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Hannah Flores
•I've heard about the Offer in Compromise but don't think we'd qualify since we both have stable jobs. We're not destitute, just don't have $7k liquid cash sitting around. Do you know if they ever offer compromises for people with regular incomes who just can't pay a large lump sum?
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Jasmine Quinn
•You're right that OIC is tough to get with stable income. It's usually for people with serious financial hardship where they'll likely never be able to pay. For your situation, a payment plan is probably more realistic. If the lump sum is the issue but you could manage it over time, definitely go with the installment agreement. Pro tip: if you can pay it off within 180 days, you can set up a short-term payment plan with no setup fee at all. Otherwise, the long-term plans have reasonable monthly minimums based on how much you owe.
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Oscar Murphy
Just a heads up - if you adjusted your W4s for this year, DOUBLE CHECK them again. My husband and I did the "two earners/multiple jobs" worksheet and still ended up owing. The worksheet is outdated and doesn't account for higher incomes properly. We finally figured out we needed to add about 12% extra withholding beyond what the worksheet suggested. Basically take your combined income, figure out your tax bracket, and make sure you're withholding at least that percentage across both jobs.
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Nora Bennett
•This is really good advice. The IRS has a Tax Withholding Estimator on their website that's much more accurate than the worksheet. It lets you put in both spouses' income and gives you the exact dollar amount to put on line 4(c) for extra withholding.
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