Look at this image a friend of mine sent to me just now, taken from her state tax return. She underpaid by 66 cents. She now has to pay $30.86 in interest for “underpayment of estimated tax.”
She’s understandably outraged by this, but doubts that it’s worth fighting. What do you think?
texasaggiemom says: She should fight it. And by that, I mean just call the phone # printed on the notice she should have received. In the dealings we’ve had with the IRS through our business, they have always been reasonable. I know that flies in the face of most anecdotes you hear about government agencies, but it’s worth a try.
Mr. Patrick says: Usually a tax return doesn’t even make allowances for differences of less than a dollar. The fine print says “if underpayment is less than $1, no payment need be remitted, if overpayment is less than $1, no refund will be issued. But the states are on the warpath for the revenue that doesn’t come in from Washington anymore, and state tax agents are desperate to make their jobs look useful.
Peter Terranova says: As a CPA, let me shed a little light:
Though she made of underpaid a total of 66 cents, she may have been required to make Estimated Tax Payments throughout the year. For example, her entire tax liability may have been $1,000 (I don’t know because the picture didn’t come through on my browser) and she may have been required to make 4 equal payment of $250 each during each quarter. If she failed to make any of them timely and sufficiently, she would be liable for a penalty.
Still, it’s ridiculous. She should request a waiver of the penalty. She’ll likely get it.
Scott says: Of course, underpayment of a credit card bill will result in a similar late fee and interest charges. Most of the time you can get it taken off if you ask.
Lord Karth says: Peter Terranova writes: Though she made of underpaid a total of 66 cents, she may have been required to make Estimated Tax Payments throughout the year. For example, her entire tax liability may have been $1,000 (I don’t know because the picture didn’t come through on my browser) and she may have been required to make 4 equal payment of $250 each during each quarter. If she failed to make any of them timely and sufficiently, she would be liable for a penalty.
Still, it’s ridiculous. She should request a waiver of the penalty. She’ll likely get it.
Not if she lives in New York province, she won’t. She’ll be lucky not to face criminal charges for tax evasion; this province is SCREAMING DESPERATE for money.
I deal with both IRS and NY DTF (Division of Taxation and Finance) on a regular basis. The IRS people I deal with are invariably polite, prepared to listen, and do actually try to treat taxpayers with respect. Payment plans are actually their preferred form of dealing with people who owe money.
DTF ? Not even close.
Your servant,
Lord Karth
Monterey says: What do I think of the ‘interest’ ? I think the state is guilty of usury.
This make payday loan companies look reasonable.
Sean says: I think she should use B of A’s accountants next year. She might not owe anything at all! 
JonF says: Ten years ago I owed back taxes to the IRS in the amount of $2400 (long story). The error was promptly caught by the Feds and the interest and fees I owed were quite nominal (I think the IRS charges just a little over the Fed rate). Ditto on the much smaller amount I owed subsequently to the state of Ohio. I do not know what state this involves but sounds to me like there’s an untold story in there somewhere.
Martin Snigg says: Cowards.
c.f.
GOOGLE has paid no tax on an estimated $940 million in web search advertising revenue generated locally, instead routing its Australian online ad sales through an Irish subsidiary, Google Ireland.[and ultimately to Bermuda!]
AnotherBeliever says: I think it’s worth a call to some state civil servant. Approach the matter with humor, and perhaps she’ll manage to convince someone in a position to help of the sheer ludicrousness of the situation. This is why computers aren’t quite ready to take over the world yet. They haven’t got a sense of irony.
1. Clearly this demonstrates the need for more government regulations, and also for the rich to pay higher taxes.
2. If this is in fact an error (as I sincerely hope it is), she should of course “fight” it, meaning just to write a letter explaining the issue. Even in the bureaucratic nightmare state of California I was able to easily resolve a mistake they made a few years ago when they “checked” my return and (mistakenly) adjusted what I owed.