bigtime tax payment

[davem2]

Hi my name is dave.  After calculating my 2020 taxes, I owe the IRS $9300 in taxes.  TT thought my best deduction option was the standard deduction. Now I am wondering if I should go back and look at the itemized deductions calculations. I am filing married joint. For 2020, my wife and I started receiving SS benefits when I lost my job. So I also started receiving unemployment.  On top of that we decided to take money from the 401K and payoff the mortgage. So (it's my fault I know) I neglected to calculate all this income. For the last six months of 2020 we were on the affordable health care coverage.  So, because I did not make updates to my income, it turns out we did not qualify for federal subsidies and we owe those monies back. So a couple of questions. In itemizing, we will have real estate taxes and some mortgage interest. Can I deduct the payments we made to the healthcare premiums and what the plan says I owe back as medical expenses? And I assume I will have to pay an underpayment penalty... true?  I have the money to pay the IRS but am thinking to pay by credit card to get the points.. but I see the IRS charges 2% for CC payments.  What is the best method for paying this amount?  Thanks for all your help and consideration.  Also I saw, TT is waiting for updates concerning the 3rd stimulus bill and affects to unemployment, so I will wait for those updates before filing.

[ThomasM125]

Yes, the insurance premiums and premium tax credit payback amount is deductible as medical expenses in 2020. However, the medical expense deduction is limited to the amount over 7.5% of your adjusted gross income.

For most tax filers, you need to have paid in 100% of your income tax liability for the current year or 90% of the liability for the previous year on a timely basis to avoid a penalty for late payment of tax, so you probably will get a penalty but it may be less than what you think, as you may have paid in enough tax based on your previous year tax.

You will have to do the math to see if the credit card points are more than the fee charged by the IRS to pay by credit card.

[NCperson]

was the 401(k) withdrawal the result of a COVID hardship? 

if so, the income can be reported over 3 years, which reduces your income tax in the short term by spreading it out over 3 years.  

that was a feature of the CARES Act. 

[VolvoGirl]

And you can exclude up to 10,200 of unemployment if your income isn't too high.  Did Turbo Tax take that off for you?  They recently updated the online version for it but haven't updated the Desktop program yet.

[NCperson]

the 3rd stimulus payment will be part of 2021 tax return.... there will be no update related to this stimulus payment on the 2020 tax return.

[davem2]

Thanks very much for responding to my question... much appreciated.

[davem2]

Thanks Thomas for your response.  You stated that the premiums and credit payback can be deducted, yet TT states in the step by step not to include premiums made to the ACA. Also, I hear that 2021 American Relief Act was going to forgive subsidy payback. But that doesn't seem to be reflected in my 2020 TT updates. Is this exemption based on your income? It is probably time to get professional tax help. My situation is maybe common or wierd.  Lost my job in december of 2019.  Started receiving unemployment. Decided to take money out of 401k to pay off my mortgage so I wouldn't lose my home, was finding it difficult to find a new position. My wife and I decided to start our SS benefits as well.  I did state my unemployment benefits with the healthcare marketplace and it is indicated on my estimate but it was never calculated as income for the entire year. So I am now facing the subsidy repayment. I had received advice that if the 401k withdrawal was due to covid hardship I could report my income over three years. But there is nothing in TT that asks that question and even with only 1/3 of that income I am about $1000.00 of additional income between receiving a $4500 refund or paying $4500 tax bill. dave

[davem2]

Thanks very much for responding to my question... much appreciated. Yes I see that reduction in my TT program. I did read something about a subsidy payback vacation in that relief act as well, but not sure if that update is in my package yet or I do not qualify.  Thanks for your help.