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Level 1

Can I deduct taxes and penalties paid this year?

Long story: we did not receive a W2 from one of my wife's jobs 2 tax seasons ago. The place went under, all her paystubs were digital, and she lost the ability to retrieve those when the place went under. Since I never received a W2 and had no way (other than a guess) on how much she made, tips, etc....I just didn't include it.

This past year, I received a bill from the IRS. Saying I owed X amount of dollars due to this W2 not being included. So it sounds like  the information made it to the IRS at some point in the next year, but never to the employees. I paid the X amount of dollars and thought I was done. No amended return was filed, just paid my bill.

Then just a couple of months ago, I got a letter from the State saying I owed them money as well. After fighting back and forth about whether or not I had to file an amended return, I paid them off as well for Y amount of dollars.

My question is, since I paid X + Y out of this year's income, can I deduct this amount anywhere on my 2014 taxes?
1 Best answer

Accepted Solutions
Alumni

Can I deduct taxes and penalties paid this year?

Federal taxes, penalties and interest paid for a prior year are not deductible.

State taxes paid for a prior year are deductible on your Federal return in the year paid, but only the taxes. Penalties and interest are not deductible.
7 Replies
Alumni

Can I deduct taxes and penalties paid this year?

Federal taxes, penalties and interest paid for a prior year are not deductible.

State taxes paid for a prior year are deductible on your Federal return in the year paid, but only the taxes. Penalties and interest are not deductible.
Level 1

Can I deduct taxes and penalties paid this year?

Under what section of my federal return is this deduction done?
Alumni

Can I deduct taxes and penalties paid this year?

It will show in the State and Local taxes section of Schedule A, Form 1040. To put it there
click on
Federal (Personal using Home and Business)
then on
Deductions and Credits
choose "I'll choose what I work on"
scroll down to
Estimates and Other Taxes Paid
click start or update on the Other Income Taxes line
scroll all the way down to
Other Income Taxes paid in 2014
Level 1

Can I deduct taxes and penalties paid this year?

Thanks!
Level 3

Can I deduct taxes and penalties paid this year?

Can I get a IRS Rev code to find where it says interest can not be deducted on late payments please. I know the penalties are not deductible, but I can not find the actual IRS code that states this. There is a lot of debate about whether the interest on late payments is deductible or not and no one sites the source. Thanks

Level 20

Can I deduct taxes and penalties paid this year?

@Mlemm2012 You have posted to someone else's very old thread.  This thread moved over from the former Answer Xchange when the migration from Answer Xchange to Real Money Talks happened in June 2019.  Unfortunately, old threads were moved with a 2019 date.  This thread may or may not really be related to your issue.  You have not mentioned what interest / payments you are referring to.

Please start your own new question in a new fresh thread.

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Level 11

Can I deduct taxes and penalties paid this year?

https://www.irs.gov/faqs/itemized-deductions-standard-deduction

Interest and penalties paid to the IRS on federal income taxes aren't deductible.

For more information, refer to Items You Can’t Deduct in the Interest Expense chapter in Publication 17, Your Federal Income Tax for Individuals.