So Overwhelmed

[mnelliej]

I'm so overwhelmed. I didn't file my taxes in time in 2020 due to experiencing depression.  Then once the due date passed, I just forgot about it entirely.  Now its time for 2021 tax filing and my taxes due are astronomical because I took out funds from my 401K (2021 was a tough year).  I've never had to owe taxes before  and I'm very scared. Can anyone recommend next steps for me? I genuinely want to file and pay what is due and past due but I don't want to be financially strapped.  Are there options for me?  

[PattiF]

There are options that you can choose to pay what you owe over time so that you won't be financially strapped. The IRS offers an installment plan where you can pay monthly or at your own schedule. Once you file your tax returns for 2020 and 2021, you will not have them hanging over your head and will be able to look forward and be able to resolve this situation. Once you do file, you will know what you owe. It may not be as bad as you are imagining. 

Here is a link to the 2020 tax return so that you can file that year. You may have a refund coming to you when you file for that year. Be sure to check if you received the first, second and third economic stimulus payments. The first two can be requested by the 2020 tax return and the third is found in the 2021 tax return.

What if I can't pay?

1. File your taxes by April 18

You are allowed to file your taxes without paying the tax you owe. If you send your tax return on time, you will avoid paying extra for filing late.

2. Pay some of the tax you owe

If you can afford to pay some, send it by April 18. The penalty for not paying your taxes depends on the total tax you owe. If you pay some now, the penalty will be smaller later.

You can make a partial payment with TurboTax. In the File section, select I will mail a check. If you choose to pay with your bank account or credit card, TurboTax will charge the total tax due.

3. Call the IRS and your state tax office

They will work with you to plan how to pay the rest of your tax. If you file your taxes before you call, the IRS might give you extra time or offer an installment plan.

Different ways to apply for an IRS installment plan

• Apply for an IRS installment plan with TurboTax
• Online on the IRS website. 
• By filling out Form 9465 sending it to the IRS
• Calling the IRS at 1-800-829-1040

[Oldlady]

Dear,    If you were treated for the depression, the IRS will act quite differently.  I had an experience where we removed 401K money to roll it, but then I was in a wreck and it looked like I was 'over the date limit' for returning the money to another company or the same company, in order to not owe as a distribution and the specialists said if I could prove I had a medical issue, that would 'allow' the IRS representative the flexibility to treat me better.  In the end, I HAD actually put the money back in time, but the company was lying that said they didn't receive it, and with the extra grace and time allowance that the wreck/IRS representative provided, I was able to discover this and prove it, whereas, if I had not had any medical diagnosis, they would have just said, facts are you took money out, the company says you didn't get it back in time, you owe, pay up or else.   So we took 20K and we were going to owe 10K in fines, yikes.   So I am hoping that you got some medical documentation of your issues with depression, even a talk documented on a pastor's or teacher's schedule might help, but medical records of any visit would be great.  I also paid Turbo tax at the time I filed, not knowing all this would transpire and they were a real help, so for this years taxes you might pay the extra, it could be worth it, even though they won't technically help with last years, this year's and last years run into each other....

[clearusa]

Take a breath.  Do what you can to complete your 2021 tax return at least to the point where you can request an extension.  If you owe them money and can afford to pay them something, send that "estimate" with your 2021 return so you don't get penalized for filing 2021 lqte.  You can file for the extension electronically and opt to mail a check; but, the extension has to be filed tomorrow.  That will buy you some time to do 2020.  Use the next few weeks to finish your 2020 return.  If you have a refund, you can apply it to what you may owe for 2021.  Finish both returns and then you can request a payment plan for whatever you cannot pay at once.

Just try to get the extension on 2021 done by tomorrow and save the cost of a late filing penalty.  You can do this....just breathe!

[fanfare]

@mnelliej 

1) to file your taxes you need the 1099-R from the custodian of your 401k.

If you had no W-2 or unemployment compensation  in 2021 then that's the only document you need.

2) you can't take money from a 401k without federal withholding.

That means a lot if not most of your tax is already paid in to the IRS.