In 2009 I had audit for 2007/2008 by IRS/federal. I had one appointment and they figured that I owe them money, so I payed them in full. Now, in 2012, I received a bill from state tax stating that I owe them tax money for 2007/2008. I thought I was clear and that I do not owe any more money. Does this mean, after I returned the money to federal that I also have to return the money to the state. Also , I had refund 2007/08 of $1400 all together and they want back $2170, with penalty. I was never aware or notified that I owe any money to the state. I want to know is it necessary to pay this bill and why has it come 4 years later? I live in Wisconsin. Thank you
Hi there! The audit in 2009 conducted by the IRS was only relating to your federal income tax liability. If they found that you owed them more money due to underreporting, it is also likely that your state tax report under reported your income. Therefore, you likely owe for state too. You should have a CPA, attorney, or both (like me) review the correspondence from the state to determine if this is in fact the case.
Best of luck,
Andrew B. Gordon
Gordon Law Group, Ltd.
One First Bank Plaza, #207 | Lake Zurich, IL 60047
Main: 847.580.1297 | Fax: 847.305.1279
Andrew B Gordon is a CPA and attorney licensed to practice law in Illinois. The information provided here is for educational purposes only and is not intended as legal advice for a particular matter. This response does not create any attorney-client relationship with the author. For specific advice about your particular situation, please consult an attorney.
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Federal and state taxes are completely separate. If you under-reported income on your Federal Income Tax, you probably under-reported on your State return. Correcting the return probably resulted in higher taxes. If the proper tax was not paid on time, you will incur a penalty. If there was a reasonable cause for your error, you may be eligible for an abatement of the penalty. These are fact specific inquiries. So, there is no way for me to know if that is a good option for you without more information.
I hope this helps!
Steven A. Leahy
Please note that the above is not intended as legal advice, it is for educational purposes only. No attorney-client relationship is created or is intended to be created hereby. You should contact a local attorney to discuss and to obtain legal advice.
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Good answers by Mr. Gordon and Mr. Leahy. The reason your state took so long is that, when IRS changes any tax return causing an increase in taxes, IRS informs your state. So, your state didn't learn of the under-reporting, until IRS notified it that your federal return had been changed to increase your taxes. And, YES, you it is necessary for your to pay the bill. If you don't, your state will take collection activity which may include placing a lien on your property, garnishing your bank account, and/or keeping future refunds until the bill is paid with interest (and perhaps penalties).
Disclaimer: Please note that this answer does not constitute legal advice, and should not be relied on, since each state has different laws, each situation is fact specific, and it is impossible to evaluate a legal problem without a comprehensive consultation and review of all the facts and documents at issue. This answer does not create an attorney-client relationship. Do NOT rely on anything I have written here -- You should contact a lawyer in your area immediately after reading my posting. The following disclosure is required pursuant to IRS Circular 230: unless otherwise expressly indicated, any federal tax advice contained in this communication, including attachments and enclosures, is not intended or written to be used, and may not be used, for the purpose of (i) avoiding tax-related penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any tax-related matters addressed herein.
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I agree with all of the other well reasoned answers to this post. The WI tax authority has taken the underreporting for the IRS and amended your return. There is a lot of information on setting up a payment plan on the Wisconsin Department of Revenue web site (linked below). From what you've stated here it does not look like you are going to be successful in contesting the liability. You may want to focus on getting into a payment plan or making a lump sum offer to resolve the liability as painlessly as possible and work quickly to avoid any collection activity from the state. Among other things, they can levy your bank account or garnish your wages, both of which are nasty and disruptive if they come as a surprise.
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