Hi all. Today I received a letter in the mail stating that I owe the IRS $1,560 dollars because of a penalty for incorrect information on my taxes. I claimed whatever education credit you get for going to college because when I filed my taxes, it automatically claimed it for me based on what I put in. I graduated college in 2024 after taking a 4 year break due to financial reasons. The IRS sent me a letter stating that I was not eligible for the credit because to them I did not attend college or I attended college for 5 years and not 4 because you can only claim the credit 4 times I believe. They sent this letter to me right before I had to very abruptly move from my apartment. If I claimed the credit and I was not eligible for it, it was a very honest mistake. I did not purposely go out of my way to try and scam the IRS.
I do understand it is my fault for not responding to the letters but like I said, I had to very abruptly pack up my entire apartment on my own that I had lived in for 7 years. I also was working a job where I worked 5 days a week from 3pm till about 3am so I loss track of time and honestly lost the letters.
The last week of October I was laid off from my job of 6 years. I am still unemployed and just recently in the last week started getting benefits which is $400 a week. The letter states that I must pay the penalty cost by December 22nd but I am in no way financially in a position able to pay that by then. Is there anything I can do? Can I call them and explain the situation? I’m not sure it would make a difference but I have never been in trouble with the IRS before and it is stressing me out.
First time ever owing a penalty on taxes. Scared and overwhelmed.
byu/Embarrassed_Key_7082 intax
Posted by Embarrassed_Key_7082
6 Comments
> I had to very abruptly pack up my entire apartment on my own that I had lived in for 7 years. I also was working a job where I worked 5 days a week from 3pm till about 3am so I loss track of time and honestly lost the letters.
They don’t care about ANY of that.
They care about, Did you in fact try to claim a 5th year of credit, or not, **period**.
It will help you — and believe it or not, destress you — to take all the emotional arguments out of this, and look at the Bare Facts As They See Them. Are they right, or wrong?
call the irs, explain, set up a payment plan. common issue.
Good luck calling and getting an actual human. If they are correct in the facts you do owe this and missing dates only increases the debt. You may be able to set up a payment plan on their website. If they are wrong and you are right..mail back a response to the letter and be prepared for a long wait for response.
If you (or your parent) claimed the American Opportunity Tax Credit for the fifth time then it was properly denied. You should confirm whether that is the reason for the denial. If so, then you are probably eligible for the Lifetime Learning Credit (LLC), and the IRS will not automatically apply that; you’d have to file an amended return.
The LLC isn’t as beneficial as the AOTC, but it could reduce the amount you owe.
Letter number? Or notice number? LTR______ or CP_______
Do you agree? Did you claim it five times? Do you have your (your parents) old tax returns to verify? Tax laws will prevail. So you need to accept your mistake or send proof that IRS is wrong. You decide which way to go.
If you accept, you can go on a payment plan https://www.irs.gov/payments/online-payment-agreement-application
Or you may qualify for CNC Currently Not Collectible. https://www.irs.gov/businesses/small-businesses-self-employed/temporarily-delay-the-collection-process
Don’t stress. You are one of millions that owe the IRS. Figure out your finances and call or go online and set up the plan. Or submit a rebuttal if you disagree.
Sounds like you (or a parent) took the AOTC 5 times. It is only allowed to be taken 4 times.
You will owe, but you can reduce what you owe by filing a 1040X and taking the Lifetime Learning Credit instead. It’s not as good (20%, and not as many qualified expenses) but it will reduce the amount owed.
Note that an amended (1040X) can take a long time to process. It’s often best to simply pay what the IRS thinks you owe. When the IRS processes your amended, they will refund the difference, with interest. Since you are unemployed right now, I would try to set up a repayment plan instead.