The IRS shell game

[alaskacobalt]

Recently I discovered that I was somehow paying too little in taxes last year by a significant amount.  So much so that it resulted in $26k underpayment to the IRS and obviously a very large tax burden I have to pay for the 2014 tax year.  My solutions were to either forego my 401k contributions and pay that debt... OR... to pay my 401k and take out a 401k loan.  Initially I was going to forego my contributions, but then I realized that meant giving up $50-$80k in estimated interest earnings by having $18k less in my 401k for the next 18 years (my fire age) and it would mean having $5k less in my IRA... this would also mean having $23k MORE in taxable income for the year, which would obviously mean more taxes next year as well.

My question is whether or not this is logical thinking here before I proceed or if I am missing something completely.  Seems like too easy of a fix on something I have spent weeks of sleepness nights pondering.  Just want to make sure I'm not underthinking the downsides at this point. 

[h2ogal]

I made a mistake and underpaid one time about 10 years ago, and the IRS set up a payment plan for me, it was really easy and they were very nice about it, set it at a payment rate I could easily afford, no pressure. 

[iamlindoro]

I made a mistake and underpaid one time about 10 years ago, and the IRS set up a payment plan for me, it was really easy and they were very nice about it, set it at a payment rate I could easily afford, no pressure.

My SO did the same accidentally in 2012, caught up with her about 6 months ago.  Same deal, easy to set up a payment plan, you get to suggest your own payment as long as you can pay in 72 months or less, and the interest rate is at least less usurious than credit cards (currently 6%).  In her case she's paying it off over 10 months.

[TN_Steve]

If you don't have payment plan option, this appears to be one of the exceptions that proves the rule against 401k loans.  Better to borrow and pay back than to forego the opportunity.  EDIT:  Assuming that your job is secure and it is highly unlikely you'd be leaving it while the loan is outstanding.

[alaskacobalt]

If you don't have payment plan option, this appears to be one of the exceptions that proves the rule against 401k loans.  Better to borrow and pay back than to forego the opportunity.  EDIT:  Assuming that your job is secure and it is highly unlikely you'd be leaving it while the loan is outstanding.

Fortunately I am in a heavy growth company and happen to be the top salesperson... hence the $26k UNDERpayment, haha.  It happens... especially when you work a commission job.  Sometimes the taxes get taken out of your base, but not your bonus and you end up super behind. 

I was thinking about doing the repayment, but I just got audited this last year and they did three previous tax years all in one and I apparently didn't do my own taxes properly with stocks earnings, etc.  I used to day trade a lot.  So I am already repaying that back so I assume I can't do a second one... anyone know if I can lump the two together and increase the payout?