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Subject Author Date
State Withholding Problem Mark Schlenoff 08-23-2007
Posted by Mark Schlenoff on August 23, 2007, 9:48 pm
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 I received a letter from my State informing me that I owed
$2540.62 in State tax because there was no evidence of 2
withholdings taken out of 2 IRA distributions which I
claimed on my State tax filing. After speaking to a State
tax rep I was told that if I mailed the 1099R forms to them
they would re-evaluate my account and send me a refund.
After 2 months (after mailing the forms to them) they
claimed they never received them.

I contacted a local State tax office and they finally
awarded me a refund for $2365.00 ; they stated that the
difference between the amount of the check I sent them at
the end of June and the amount refunded now is the interest
assessment for the estimated underpayment in the amount of
$175.62.

Why should I pay interest when I filed on time and the
withholding amounts were sent to the State on time? Doesn't
the State credit accounts when they receive withholding
amounts such as these? My name and SS# were on the 1099s.
Why was I told I should have sent the 1099Rs in when I
filed? I thought all the tax form required was to staple
W2's to it when filing, not 1099's.

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Posted by Phil Marti on August 24, 2007, 7:29 pm
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> Why should I pay interest when I filed on time and the
> withholding amounts were sent to the State on time? Doesn't
> the State credit accounts when they receive withholding
> amounts such as these? My name and SS# were on the 1099s.
> Why was I told I should have sent the 1099Rs in when I
> filed? I thought all the tax form required was to staple
> W2's to it when filing, not 1099's.

What did the state instructions say about documents to send?
This varies widely by state. Lesson learned for the
future.

Even if you didn't comply with the instructions it sounds
unreasonable for them to be charging you interest. I'd kick
it up the food chain.

--
Phil Marti
Clarksburg, MD

<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ------------------------------------------------------- >>

Posted by John H. Fisher on August 24, 2007, 7:29 pm
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> I received a letter from my State informing me that I owed
> $2540.62 in State tax because there was no evidence of 2
> withholdings taken out of 2 IRA distributions which I
> claimed on my State tax filing. After speaking to a State
> tax rep I was told that if I mailed the 1099R forms to them
> they would re-evaluate my account and send me a refund.
> After 2 months (after mailing the forms to them) they
> claimed they never received them.
>
> I contacted a local State tax office and they finally
> awarded me a refund for $2365.00 ; they stated that the
> difference between the amount of the check I sent them at
> the end of June and the amount refunded now is the interest
> assessment for the estimated underpayment in the amount of
> $175.62.
>
> Why should I pay interest when I filed on time and the
> withholding amounts were sent to the State on time? Doesn't
> the State credit accounts when they receive withholding
> amounts such as these? My name and SS# were on the 1099s.
> Why was I told I should have sent the 1099Rs in when I
> filed? I thought all the tax form required was to staple
> W2's to it when filing, not 1099's.

That's something you'll have to settle with your state tax
department. Each state has its own laws regarding
distributions. In some states, the distributions would not
even be taxable. As for the interest owed, did you have
other income which would have increased your state liability
without regard to the retirement funds??? They may be
charging for any amount underpaid, on that other income,
regardless of the IRA's.

<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ------------------------------------------------------- >>

Posted by Mark Schlenoff on August 26, 2007, 3:00 am
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>> I received a letter from my State informing me that I owed
>> $2540.62 in State tax because there was no evidence of 2
>> withholdings taken out of 2 IRA distributions which I
>> claimed on my State tax filing. After speaking to a State
>> tax rep I was told that if I mailed the 1099R forms to them
>> they would re-evaluate my account and send me a refund.
>> After 2 months (after mailing the forms to them) they
>> claimed they never received them.
>>
>> I contacted a local State tax office and they finally
>> awarded me a refund for $2365.00 ; they stated that the
>> difference between the amount of the check I sent them at
>> the end of June and the amount refunded now is the interest
>> assessment for the estimated underpayment in the amount of
>> $175.62.
>>
>> Why should I pay interest when I filed on time and the
>> withholding amounts were sent to the State on time? Doesn't
>> the State credit accounts when they receive withholding
>> amounts such as these? My name and SS# were on the 1099s.
>> Why was I told I should have sent the 1099Rs in when I
>> filed? I thought all the tax form required was to staple
>> W2's to it when filing, not 1099's.

> That's something you'll have to settle with your state tax
> department. Each state has its own laws regarding
> distributions. In some states, the distributions would not
> even be taxable. As for the interest owed, did you have
> other income which would have increased your state liability
> without regard to the retirement funds??? They may be
> charging for any amount underpaid, on that other income,
> regardless of the IRA's.

I did kick it up for further explanation. I was told that
the interest was charged because I owed in excess of $500 at
the time of filing. That is an assessment because of that
reason.

<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ------------------------------------------------------- >>

Posted by Katie on August 26, 2007, 3:00 am
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> I received a letter from my State informing me that I owed
> $2540.62 in State tax because there was no evidence of 2
> withholdings taken out of 2 IRA distributions which I
> claimed on my State tax filing. After speaking to a State
> tax rep I was told that if I mailed the 1099R forms to them
> they would re-evaluate my account and send me a refund.
> After 2 months (after mailing the forms to them) they
> claimed they never received them.
>
> I contacted a local State tax office and they finally
> awarded me a refund for $2365.00 ; they stated that the
> difference between the amount of the check I sent them at
> the end of June and the amount refunded now is the interest
> assessment for the estimated underpayment in the amount of
> $175.62.
>
> Why should I pay interest when I filed on time and the
> withholding amounts were sent to the State on time? Doesn't
> the State credit accounts when they receive withholding
> amounts such as these? My name and SS# were on the 1099s.
> Why was I told I should have sent the 1099Rs in when I
> filed? I thought all the tax form required was to staple
> W2's to it when filing, not 1099's.

What state are you dealing with?

In general, you need to attach to your return any document
that verifies amounts that were withheld from your income
and paid over to the government on your behalf -- that's
true for federal as well as state income tax purposes. For
example, right on the front of the 1040 where you attach the
W-2s, it says "Also attach Forms W-2G and 1099R if tax was
withheld." Presumably you followed that instruction and
attached the 1099R on your federal return; otherwise you
would have received a similar notice from the IRS.

If all of your state income tax liability was covered by
withholding, there should have been no interest charge or
penalty for underpayment of estimated taxes. If there was
an additional amount due with the return, which you paid at
the time you filed it, an underpayment penalty (which is
essentially an interest charge from the date an estimated
tax payment was due to the due date of the return) may have
applied.

You haven't given us enough information to determine whether
or not the interest charge is appropriate. If it is not,
you should file a claim for refund of that amount with your
state. Depending on the state, you may be able to do that
by writing a letter to the state tax authority explaining
the facts and requesting a refund. Be sure to write CLAIM
FOR REFUND in large letters at the top of your letter to
ensure appropriate processing of your claim. Some states
provide a particular form that you will need to use.

Katie in San Diego

<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ------------------------------------------------------- >>

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