Kentucky Tax...they are accusing me of not paying

Tax, SDIRAs & Cost Segregation
7yFollow

Kentucky Tax...they are accusing me of not paying

Paul Passafiume
Prospect, KY · Member since 2017 · 39 posts · 13 votes

Here's the skinny...I paid my 2017 Kentucky state income taxes on time and each quarter and correct. (most my income is self employed)

KY has an online payment portal. Apparently there was a glitch or else I selected the wrong year, and the payments got applied to 2016. KY never notified me, and never gave a refund for 2016 overpayment. I have email confirmation of each of the payments I made in 2017. Now a whole year later today, I get a letter saying I owe the same tax I already paid, plus about a grand in interest, and 4 grand in penalties.

I already sent them a letter with the confirmation of payment receipts of the tax they think they are owed and am awaiting to hear back

Here's my question...two reps at the KY Dept of Revenue told me state law doesn't allow refund of interest, but they allow refund of penalties. That seems really off to me.

To the CPAs and any tax attorneys around the boards...can KY charge me interest on money they already had in their bank account, even if it was apparently applied to 2016 (even assuming I clicked 2016 when I paid them online, which I am disputing with them). I assume since I proved to them I already paid the 2017 tax, that part will get waived, and so will the penalty. But the interest thing seems crazy! How can they charge me interest on money that was apparently sitting in their bank account all along, even if it was tagged 2016 although it was paid in every Q of 2017?  (The online portal transfers money to a bank they designate to receive the ACH funds). 

And not to get too far in the weeds, this is a story why so many high income earners would love to be around this beautiful city of Louisville, but so many leave for tax havens like FL or TX where they'd never deal with these taxes in the first place (and still have far superior roads, schools, jails, really, everything!)

0Reply
14 views

12 Replies

Jump to latestLatest
  • Brandon Hall
    CPA · Raleigh, NC · Member since 2013 · 1k+ posts · 2k+ votes
    7y

    In my experience, you should be fine. You generally have one “account” with the state and they just need to re-tag the funds as 2017.

    If they stick to their guns, you could take the position that they owe YOU interest on the funds you paid in. But I doubt it will come to that.

    0Reply
  • Eamonn McElroy
    Accountant · Atlanta, GA · Member since 2015 · 1k+ posts · 1k+ votes
    7y

    @Paul Passafiume

    Something is getting lost in translation.  Usually it isn't a big deal to recode payments if they were obviously meant to be one thing and not another (e.g. 2017 estimated tax payments, not 2016 estimated tax payments).

    0Reply
  • Basit SiddiqiBusiness Member
    Accountant · New York, NY · Member since 2015 · 8k+ posts · 3k+ votes
    7y

    @Paul Passafiume

    Most notices issued by the IRS/States are computer generated and not triggered by an actual person.

    With that said - the computer noticed that the 2017 tax was not paid and automatically issued you a notice(despite paying it but potentially to the wrong year).

    I think once an actual human can look at the records and see what happened that they will waive the penalties and interest.

    Normally interest is not abatable as this is something the government was entitled to. But I think in your instance it will be abated.

    I would look to communicate with the states via fax or email. I find it that they respond and resolve issues faster that way.

    [email protected]917-280-8544
    Basit Siddiqi CPA4.979 Reviews
    View Page
    0Reply
  • Paul Passafiume
    OP
    Prospect, KY · Member since 2017 · 39 posts · 13 votes
    7y
    Originally posted by @Eamonn McElroy:

    @Paul Passafiume

    Something is getting lost in translation.  Usually it isn't a big deal to recode payments if they were obviously meant to be one thing and not another (e.g. 2017 estimated tax payments, not 2016 estimated tax payments).

    This is what I don't get! I called the number on the notice and the lady was rude as hell. She kept interrupting and said " write a letter." I called a second lady who was nicer but was still trying to rush me off the phone. I explained that Ky HAS the money and has had it for a year. I asked why she couldn't just reassign the money in their computer and she seemed clueless. She was also the one that said Kentucky state law does not allow forgiveness of interest.

    I am so mad over this I will probably be moving my business, and my residence, across the bridge to Louisville's S. Indiana suburbs. Indiana is a much more business minded state and these kinds of shenanigans have really hurt KY. 

    0Reply
  • Sam Shueh
    Real Estate Agent · Cupertino, CA · Member since 2016 · 4k+ posts · 1k+ votes
    7y

    That is another reason you could have your tax filers submit your tax. They save you for all head aches. I use a CPA who has never be challenged all these years.  

    0Reply
  • Paul Passafiume
    OP
    Prospect, KY · Member since 2017 · 39 posts · 13 votes
    7y
    Originally posted by @Sam Shueh:

    That is another reason you could have your tax filers submit your tax. They save you for all head aches. I use a CPA who has never be challenged all these years.  

    So I have a CPA who does my taxes....but you are saying I should pay him to send the quarterly taxes? What do CPAs generally charge for this? Seems a bit overkill but he would need to send federal and state estimated taxes 4 times yearly. I've never had a problem with the feds online, and unlike Kentucky's sloppy online system, the fed online system is pretty good. 

    0Reply
  • Eamonn McElroy
    Accountant · Atlanta, GA · Member since 2015 · 1k+ posts · 1k+ votes
    7y

    @Paul Passafiume  Most of the time reps at the IRS and state agencies will be rude, short, and not knowledgeable.  This is anecdotal and based on my experience.  Some state and local jurisdictions are a lot nicer than others.  A lot of people don't get the "joy" of experiencing this because their CPA/EA interfaces with DORs.

    "So I have a CPA who does my taxes....but you are saying I should pay him to send the quarterly taxes? What do CPAs generally charge for this? Seems a bit overkill but he would need to send federal and state estimated taxes 4 times yearly."

    For my clients, next year estimates are built into tax return prep and are based on the current year numbers (the "safe harbor" basis").  If you want to update estimates for changes in facts and circumstances during the year it's usually billable at the standard hourly rate.  This doesn't include making the payment for you.  Vouchers are provided and you can either mail in a check with the voucher or pay online, as applicable.  It's rare that a CPA will make the payment on your behalf.

    0Reply
  • Stanley Bronstein
    Attorney, CPA, Broker & Author · Scottsdale, AZ · Member since 2018 · 532 posts · 488 votes
    7y

    @Paul Passafiume You definitely need to write them a letter.  All communications should be in writing so that they are documented. You will pretty much almost never get this type of problem resolved over the phone.

    Even better, have your CPA write the letter.

    0Reply
  • Paul Passafiume
    OP
    Prospect, KY · Member since 2017 · 39 posts · 13 votes
    7y
    Originally posted by @Stanley Bronstein:

    @Paul Passafiume You definitely need to write them a letter.  All communications should be in writing so that they are documented. You will pretty much almost never get this type of problem resolved over the phone.

    Even better, have your CPA write the letter.

    I wrote the letter. I had to take a bit of a personal stab at them in the last paragraph, basically stating I lost a whole day of time and wages (true), and this is part of what makes KY not friendly for business (also true).  

    But the gist of my letter states I'd like anything marked 2016 to apply to 2017 and I blamed their computers for the error. I argued since they had the money all along, I don't owe interest or penalties. I then provided receipt of payments with email confirmations from 2017 plus bank statements to show the money left my account to their bank. If they don't waive it, I am going to make a big stink about it, mostly out of principle. But sure, the penalties would smart too. 

    0Reply
  • Stanley Bronstein
    Attorney, CPA, Broker & Author · Scottsdale, AZ · Member since 2018 · 532 posts · 488 votes
    7y

    @Paul Passafiume I hope everything works out.

    FYI, this kind of thing can happen with any state, not just Kentucky (and probably does).

    0Reply
  • Eamonn McElroy
    Accountant · Atlanta, GA · Member since 2015 · 1k+ posts · 1k+ votes
    7y

    @Paul Passafiume "I wrote the letter. I had to take a bit of a personal stab at them in the last paragraph, basically stating I lost a whole day of time and wages (true), and this is part of what makes KY not friendly for business (also true).

    But the gist of my letter states I'd like anything marked 2016 to apply to 2017 and I blamed their computers for the error. I argued since they had the money all along, I don't owe interest or penalties."

    I like the passion but I would change the approach.

    Flip the shoes for a minute and think about it.  DOR reps are stressed, low-paid, and have people yelling at them most of the day.  Hostile phone calls and letters rarely make progress.  Your letter might get "accidentally" brushed into the garbage can in 10 seconds flat depending on the mood of the person who reads it.

    You'll catch more flies with honey than vinegar...

    I would be neutral, calm, and objective -- state the facts only and use "please" a lot.

    0Reply
  • Matthew Paul
    Severna Park, MD · Member since 2013 · 7k+ posts · 7k+ votes
    7y

    Call your elected official

    0Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free