Payments and Penalties

If you can pay the IRS in less than 120 days from April 15, you should file your return and send in as much money as you can afford to send in with the return. The IRS will send you a bill every 30 days up to 120 days which at that time you will receive the dreaded certified letter saying you are out of time.

Individuals can base their payments on:
90% of the current years tax or
100% of the prior years tax or
110% of the prior years tax if the prior year's AGI is more than $150,000 ($75,000 if filing Married filing Separately)
Note that there is no penalty for not paying federal estimates if the current year's tax is less than $1,000 or there was no tax liability in the precedding year.

You can claim the exclusion for qualified principal residence indebtness on Form 982 by checking the box on line 1e and entering the excludable amount on line 2. If you continue to own the residence you must reduce the basis on line 10b.

You are allowed to exclude cancelled debt from gross income if it is qualified principal residence indebtness. Qualified principal residence indebtness is debt incurred in acquiring, constructing, or substantially improving your principal residence and which is secured by your principal residence. It also includes debt secured by your principal residence that refinances debt incurred in acquiring, constructing, or substantially improving your principal residence but only to the extent of such refinanced debt. The maximum exclusion is 2 Million or 1 million if filing separately.

If a debt is cancelled or forgiven other than as a gift or bequest the debtor generally must include the cancelled amount in gross income for tax purposes. Qualified principal residence indebtness is excluded from income. Exclusions are also allowed for business real estate debt or farm debt of insolvent and bankrupt individuals. The exclusions are allowed for up to 2 million of debt.

Form 1099-C is issued by banks, credit unions and federal government agencies that forgives or cancels a debt that you owe $600 or more. Generally the amount in box 2 must be reported as other income on Form 1040 line 21 unless one of the exclusions applies.

Generally, the cancellation of student loans results in taxable income unless an exception exists. Certain exclusions exist for working in a certain geographic location, public service positions in government or charitable organizations, undeserved communities

If debt on your credit card was cancelled, you must report the cancelled amount as income on Form 1040 line 21 unless you were insolvent immediately before the cancellation or the cancellation occurred in a Title 11 bankruptcy case.

Yes. Form 8379 is the form you can use for Injured Spouse relief to get your portion of a joint tax returns refund. You are an injured spouse if all or part of your share of the overpayment shown on your joint IRS Form 1040 was or is expected to be applied against your spouse’s past due child support or spousal support payments of Federal debts such as student loans. You can file IRS Form 8379 if all 3 of the following conditions are met. You are not required to pay the past due amount. You received and reported income such as wages, taxable interest etc. on a joint return or your main home was in a community property state other than Arizona. (Community property states are CA,ID,LA,NE,NM,TX,WA and WI). You made and reported payments such as Federal income tax withheld from your wages or estimated tax payments or you claimed an earned income credit or other refundable credit on a joint return.