Help! I just got blown away by my tax bill

Fort Collins, Colorado
Tax, SDIRAs & Cost Segregation
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Help! I just got blown away by my tax bill

Ben Cochran
Fort Collins, CO · Member since 2013 · 109 posts · 36 votes

Last year I had to sell half of a duplex. I met with my CPA, discussed the details and they estimated the taxes owed would be in the neighborhood of $10k. I just got my returns back and I ended up owning over $30k. My CPA of course now doesn’t remember his estimate of $10k. Other than setting up a payment plan with the IRS, is there anything else I can do to possibly reduce my $30k tax burden? 

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Michael PlaksPro Member
Tax Accountant / Enrolled Agent · Houston, TX · Member since 2014 · 5k+ posts · 6k+ votes
2y
Quote from @Ben Cochran:

Last year I had to sell half of a duplex. I met with my CPA, discussed the details and they estimated the taxes owed would be in the neighborhood of $10k. I just got my returns back and I ended up owning over $30k. My CPA of course now doesn’t remember his estimate of $10k. Other than setting up a payment plan with the IRS, is there anything else I can do to possibly reduce my $30k tax burden? 

The two numbers - $10k and $30k - may not be contradictory. You may be talking about two different things,

Your CPA may have estimated that selling your property generated $10k of additional tax liability, on top of your other taxes. If you owed $20k from your other income, such as being a realtor or a wholesaler for example, then the total changes to $30k. Of if you under-withheld $20k from your W2 job. 

Nobody can answer "what can be done" without a review of your actual tax return. Many tax accountants will do it for you if you reach out.
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  • Eric Williams
    Accountant · Houston, TX · Member since 2023 · 147 posts · 41 votes
    2y

    The installment plan might be available, but do not default on any payments because they will terminate and assess accordingly. 

    Here is a link:

    IRS payment plan options – Fast, easy and secure | Internal Revenue Service

    Long-term payment plan (also called an installment agreement) – For taxpayers who have a total balance less than $50,000 in combined tax, penalties and interest. They can make monthly payments for up to 72 months. Taxpayers are encouraged to set up plan payments using direct debit (automatic bank withdraw), which eliminates the need to send a payment each month, saves postage costs, and reduces the chance of default. The IRS requires direct debit for balances between $25,000 and $50,000.

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  • Chris SeveneyBusiness Member
    Moderator
    Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
    2y
    Quote from @Ben Cochran:

    Last year I had to sell half of a duplex. I met with my CPA, discussed the details and they estimated the taxes owed would be in the neighborhood of $10k. I just got my returns back and I ended up owning over $30k. My CPA of course now doesn’t remember his estimate of $10k. Other than setting up a payment plan with the IRS, is there anything else I can do to possibly reduce my $30k tax burden? 


     Have you reviewed this with your CPA on why its $30k? 

    Did you take a lot of depreciation previously? 

    How long did you hold the asset for?

    How much did you make on it?

    What tax bracket are you in?

    For example, if you held it and made $100k on it and depreciated it that may not be far off depending on your tax bracket and how long you held it for. 

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  • Michael PlaksPro Member
    Tax Accountant / Enrolled Agent · Houston, TX · Member since 2014 · 5k+ posts · 6k+ votes
    2y
    Quote from @Ben Cochran:

    Last year I had to sell half of a duplex. I met with my CPA, discussed the details and they estimated the taxes owed would be in the neighborhood of $10k. I just got my returns back and I ended up owning over $30k. My CPA of course now doesn’t remember his estimate of $10k. Other than setting up a payment plan with the IRS, is there anything else I can do to possibly reduce my $30k tax burden? 

    The two numbers - $10k and $30k - may not be contradictory. You may be talking about two different things,

    Your CPA may have estimated that selling your property generated $10k of additional tax liability, on top of your other taxes. If you owed $20k from your other income, such as being a realtor or a wholesaler for example, then the total changes to $30k. Of if you under-withheld $20k from your W2 job. 

    Nobody can answer "what can be done" without a review of your actual tax return. Many tax accountants will do it for you if you reach out.
    2Reply
  • Nate MeekerBusiness Member
    Real Estate CPA | California · Member since 2020 · 543 posts · 251 votes
    2y

    @Ben Cochran ask or look for a 2 year comparison and go line by line - this will typically reveal what caused it. 

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  • Basit SiddiqiBusiness Member
    Accountant · New York, NY · Member since 2015 · 8k+ posts · 3k+ votes
    2y

    Was there any documentation of the $10,000 estimate such as an email or workpaper?

    Your CPA should be able to explain to you why there is a $30,000 tax bill.
    I.E. your house had a $100,000 gain of which you are in the 24% tax bracket for federal and 6% for state which resulted in the $30,000 tax bill.

    You may want to consider getting the return reviewed.

    Is your 2022 tax return being done now?
    Unless you live in an area that the IRS designated as a disaster, your return may be considered late which will add penalties and interest.

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