Audit/tax return for 2007/2008

Asked about 2 years ago - Milwaukee, WI

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

Attorney answers (4)

  1. Andrew B Gordon

    Pro

    Contributor Level 11

    8

    Lawyers agree

    Answered . 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,

    Good 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
    ABG@GordonLawLtd.com
    www.GordonLawLtd.com

    Andrew B Gordon is a CPA and attorney licensed to practice law in Illinois. The information provided here is for... more
  2. Steven Anderson Leahy

    Pro

    Contributor Level 17

    7

    Lawyers agree

    Answered . 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!
    Respectfully,
    Steven A. Leahy
    www.chicagotaxteam.com

    Please note that the above is not intended as legal advice, it is for educational purposes only. No attorney-... more
  3. Paul Arnold Nidich

    Contributor Level 12

    5

    Lawyers agree

    Answered . 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... more
  4. John P Fazzio III

    Pro

    Contributor Level 16

    1

    Lawyer agrees

    Answered . 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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