25 Oct Why do I owe interest on back taxes?
Q. Monthly, I am paying off a tax debt of $3,088 from 2012 because of a math error. However, I did not receive the notice until 2015 and, of course, the interest had already accrued exponentially. Shouldn’t the state bear some responsibility for the interest because it took three years for them to tell me?
A. Sorry, but that’s not how it works.
The state’s position is that you had use of the funds for the period, and therefore, there is a cost for the use of the funds, said Kenneth Bagner, a certified public accountant with Sobel and Co. in Livingston.
That cost is the interest.
Bagner said the state generally has three years from the due date of your return, plus any extensions, to let you know about any changes to your return.
You can dispute those changes, but if you lose, the debt would eventually go to collections, he said.
It sounds like you’re in an installment plan, and Bagner recommends you continue paying until you’re done.
“If you paid the payments every month during the whole agreement and there were penalties associated with the debt, not the interest, you can ask for relief of the penalties and sometimes they may consider abatement of penalties only,” Bagner said.
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