Not allowing a tax deduction

[knifemaster]

What is the name of your state? Oregon

In 2004 we owed taxes to the federal government. Arrangements were made to make monthly payments. We settled the debt in 2005 paying it in full. However, in 2005 filings we reported this tax payment along with the deductions of my 1099R and the deduction from social security. I am a poor retired senior citizen living on nuts and roots and berries.

In July of 2007 received a notice from IRS stating we owe them $1,600.00 plus $187.00 interest and penalties. The amount of deductions claimed did not match other sources. It was found after researching that the amount in question is the amount we paid in taxes to them. They are disallowing this because the amount was due in 2004 paid in 2005 but that is unacceptable for their records.

Do we have any recourse here? It was money that was paid to them, and yet now we have to pay it again including the penalties and interests.

[LdiJ]

Originally Posted by knifemaster

What is the name of your state? Oregon

In 2004 we owed taxes to the federal government. Arrangements were made to make monthly payments. We settled the debt in 2005 paying it in full. However, in 2005 filings we reported this tax payment along with the deductions of my 1099R and the deduction from social security. I am a poor retired senior citizen living on nuts and roots and berries.

In July of 2007 received a notice from IRS stating we owe them $1,600.00 plus $187.00 interest and penalties. The amount of deductions claimed did not match other sources. It was found after researching that the amount in question is the amount we paid in taxes to them. They are disallowing this because the amount was due in 2004 paid in 2005 but that is unacceptable for their records.

Do we have any recourse here? It was money that was paid to them, and yet now we have to pay it again including the penalties and interests.

Why would you think that your tax payment for 2004 (which you paid in 2005) would be a tax deduction for 2005?

Apparently what you did was deduct the amount of 2004 taxes that you paid, from the amount of 2005 taxes due. So it isn't that you are paying it twice, its that you credited to yourself twice. You got credit for paying your 2004 taxes, and took credit again for it towards your 2005 taxes.

You need to set up another installment agreement, and this time remember that the money goes towards your 2005 taxes, not towards the taxes for any other year.

You are also using the term "deduction" wrong. You didn't have any deductions on your social security or 401k. You had tax withholding.

I realize that you are low income, however you might want to either consult with a tax professional, or go down to the closest IRS office and ask them to explain to you how it all works.

[knifemaster]

I'm still not sure why I can't claim the money I paid in 2005.
When I filed my 2004 tax I did not know I owed more tax ( this was in Jan-April of 2005) So when I filed and found I needed to pay more tax it could only be paid in 2005. There was money witheld in 2004 but not enough. How could I get credit in 2004. There was more money witheld in 2005 for 2005 taxes plus $1664 out of pocket. All this went to pay income tax. I can't see where I received any credit for the $1664.

Thank for your time Mike

[FlyingRon]

By the way federal income tax is not deductible on your federal return regardless of when or how you paid it.

[url]http://www.irs.gov/taxtopics/tc503.html[/url]

But the other poster is right. It's not a deduction you took. You claimed a tax payment that was to settle the previous years debt on the current year's taxes. Essentially you want to use that pay the 2005 tax due in addition to the 2004 tax due. Can't do that, brother.