Tom's Tax Tip

[yesthattom]

If you receive a letter from the IRS that says you messed up and you have to pay $A plus a fine of $B for making the mistake, just send them a check for $A. They won't come after you for the $B.

Why?

Because many years ago someone did that and took it to tax court. He said, "Do I owe you $A now?" the IRS said, "No" and he replied, "Well then I certainly don't owe you a fine, do I?"

The judge upheld it. It's been true ever since.

(Obviously, ask you tax advisor before doing this.)

(And, no, I didn't receive any such letter.)

Comments

[gmdraves.livejournal.com]

The first year I lived in NY, I worked for several months as a temp, and I gave the agency a W-4 on which I claimed to be exempt from income tax. Needless to say, I filed late the following year trying to come up with the money for my outstanding tax bill. I included a letter of explanation with both my federal and state filings, and Uncle Sam was cool--sending me a bill for interest, but no penalties. NYS, however was hard-ass--they sent me a bill for interest and penalties totaling in excess of 4 times the outstanding tax amount. I paid, but included a very angry letter (I still have a copy of it) on which I copied my state rep and state senator. My state rep made an inquiry, and I wound up getting a full refund of both the penalties and interest!