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Chapter 18: Additional Payments, Penalties, Installment Agreement, and Injured Spouse

After you have figured your income, calculated your income tax, claimed your nonrefundable credits and added any additional tax you owe, you are ready to determine whether you are due a refund or if you owe an additional amount.

To do this, you subtract your total payments on line 72 of Form 1040 from your total tax liability on line 63.

What are payments?

Payments include not only payments you have made through withholding or estimated tax payments, but also such refundable credits as the earned income credit. You have already learned how to report withheld taxes, the earned income credit, and the additional child tax credit. Additional items reported in the payments section of Form 1040 include estimated tax payments, amount applied from prior year refund, and social security tax paid that exceeds the maximum amount set by law.

What are tax penalties?

The tax law provides penalties for failure to file returns or pay taxes as required. The most common is the penalty for underpayment of your tax. There are several exceptions to this penalty requirement and the IRS may grant a waiver in certain circumstances. If you underpaid your taxes and cannot pay the full amount due with your tax return, you can ask to make monthly installment payments to the IRS.


Your payments and credits are deducted from your total tax liability on line 63 of Form 1040. If you payments are greater than your tax liability, you will report an overpayment on line 73 which can be refunded to you. If your tax liability is greater than your payments, you will report the amount you still owe on line 76.



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