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California Interest and Penalties

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Orebell

Member
What is the name of your state? CA

OK here is the situation. I am helping out a friend and have been pretty successful so far both with the IRS and the State of Cal. In a nushell, my friend has for at least the last 20 years has not filed any tax return. I am trying to resolve an issue with the state related to 1989 taxes.

My friend owed $1560 in taxes and he paid in $1300 via his employment wages. His balance owing was $260. The state has imposed various penalties which I do not disagree with. However, the total interest charge is $1700+. What I cannot tell from the statement sent by the state is what they are charging interest on. Are they charging on the $260 or are they adding all the penalties plus the tax due and charging interest on that.

I have requested from the state that they explain to me how they compute the interest and a year by year breakdown of the interest charged. I know it has been a lot of years, but charging a man over $1700 in interest for $260 owed seems really extreme to me. So I guess my question is does anyone know how they would compute interest. Also, is there any statute on how much interest they can charge or they can keep charging until the bill is paid?

One more issue. Some of you may be aware that the state of California has implemented this amnesty program. Well, my friends tax return for this year was not completed in time to be under the amnesty program. So, as promised the state has imposed a 50% amnesty interest penalty of $880. Personally I think it is criminal for them to do that, but that is a whole different story. I have added up the penalties and interest every which way to figure out where they get $880 and I cannot figure out what they are computing it on and I cannot figure it out. Again, I have asked the state for relief of this penalty as well as an explanation of how they compute their numbers and to date I have not got an answer. My question is does anyone know how they are computing this insane 50% penalty and if there is any chance of mercy on it.

In a nutshell, I started off with my friend owing $16,000 ($4,500 of which they already siezed) in CA state taxes. I was able to get that $16,000 reduced to $3,200 owing meaning he got $1300 of the previous $4500 collected back. All in all, I think I have won the war with the state of CA. Some people might say leave it alone and be happy.

I say if I would have just been happy in helping my friend get his money back and straighten out his affairs, most likely I would have given up a long time ago. My goal is I would like to see another $1000 to $1500 back from the state. I am not saying they cannot collect interest but $1700 on $260 is insane. And come on, 50% on top of that, the mafia does not even do that.

I would ask this. I am looking for some help. If you feel like you want to respond in some negative way, don't even bother. I want solid advice that I can use. Maybe I have overlooked something in all this.
 


Snipes5

Senior Member
Is it possible that the $1700 interest was on the $16,000 original debt?

You haven't given us enough information to figure out the proper answer. However, I would either hire an Enrolled Agent to help you sort it out, or just call it a day.

The State of California is notorious for being unreasonable on issues like this, and you did manage to get it reduced to just a fraction of the original amount. I'd say your friend did quite well for having failed to file CA taxes for twenty years.

Snipes
 

Orebell

Member
More information

Thanks Snipes. The $16,000 was multiple years not for the one year. As far as giving you enough information, I gave you as much as I got. The state was not real detailed on how they computed things. They have a line item that says $1700 in interest with no detail whatsoever.That is why I asked them for an explanation of their computations as well as some relief.

I look at it this way. I took $16,000 (3 years worth of taxes, interest, and penalties) in state taxes and got it reduced to $3200. I took 6 years of federal returns and got $50,000 (for one of the years) reduced to $10,000(Yes, I got him a $40,000 refund from the IRS). I am pretty sure I could have got these numbers reduced further but I just could not get enough documentation going back 15+ years and believe me I tried and tried. All this was done without any expense to an enrolled agent. An enrolled agent would have cost this man an arm and a leg to do the work that I did. I have nothing at all against enrolled agents, but the answer should not be hire an enrolled agent or give up.

Thanks, but I am not calling it a day. As I stated in the original post or at least intended to say was that in regards to getting answers to the computations of interest, I really am not expecting any explanation or any adjustments from the state, but one can never know.

The question I posed was does anyone know how the state of California computes their interest on unpaid taxes as well as how they compute their 50% mafia amnesty penalty. I also asked if anyone knew if there was any statute on charging interest or if they can just keep charging until the debt is taken care of. If you know any information that might shed some light on the situation, please share.


Snipes5 said:
Is it possible that the $1700 interest was on the $16,000 original debt?

You haven't given us enough information to figure out the proper answer. However, I would either hire an Enrolled Agent to help you sort it out, or just call it a day.

The State of California is notorious for being unreasonable on issues like this, and you did manage to get it reduced to just a fraction of the original amount. I'd say your friend did quite well for having failed to file CA taxes for twenty years.

Snipes
 

Orebell

Member
Update to this situation

I just got a fax from the state of California in regards to this question that I posed. Basically what they did was took each line item (Tax owed plus 3 different penalties) and charged interest on each one. If you add all of those up, it was $836 but each one was charged interest seperate. That came to $1700+ in interest. I am not happy about that, but at least I got an explanation/breakdown.

I think the one that burns me the most is the 50% amnesty charge. They took the $1700+ in interest and charged him an amnesty penalty of $880. You can say what you want about someone not paying their taxes. My friend did not pay his taxes or I should rephrase it that he did not keep his records and file his returns properly. I believe he suffered from mental illness. Had he done so he would have never even had any liability at all but I personally cannot prove it, but I would lay money on the table based on his history that I do have.

I have to wonder if that 50% amnesty penalty will ever be challenged. It is one thing to charge a person a fair interest rate, but 50% is just wrong. If anyone knows any group who may be trying to fight this what I would call criminal penalty please let me know.

As for me and where I go in helping my friend I think I have done all that I can on this specific item. The only way I could get this reduced further is if in the next 10 months I come across some records that my friend had and can re-file this return, but I seriously doubt that will happen. While the state may have won a battle or two, in the end my friend wins the war. I only wish he was around to see it. Oh well, such is life.


Orebell said:
What is the name of your state? CA

OK here is the situation. I am helping out a friend and have been pretty successful so far both with the IRS and the State of Cal. In a nushell, my friend has for at least the last 20 years has not filed any tax return. I am trying to resolve an issue with the state related to 1989 taxes.

My friend owed $1560 in taxes and he paid in $1300 via his employment wages. His balance owing was $260. The state has imposed various penalties which I do not disagree with. However, the total interest charge is $1700+. What I cannot tell from the statement sent by the state is what they are charging interest on. Are they charging on the $260 or are they adding all the penalties plus the tax due and charging interest on that.

I have requested from the state that they explain to me how they compute the interest and a year by year breakdown of the interest charged. I know it has been a lot of years, but charging a man over $1700 in interest for $260 owed seems really extreme to me. So I guess my question is does anyone know how they would compute interest. Also, is there any statute on how much interest they can charge or they can keep charging until the bill is paid?

One more issue. Some of you may be aware that the state of California has implemented this amnesty program. Well, my friends tax return for this year was not completed in time to be under the amnesty program. So, as promised the state has imposed a 50% amnesty interest penalty of $880. Personally I think it is criminal for them to do that, but that is a whole different story. I have added up the penalties and interest every which way to figure out where they get $880 and I cannot figure out what they are computing it on and I cannot figure it out. Again, I have asked the state for relief of this penalty as well as an explanation of how they compute their numbers and to date I have not got an answer. My question is does anyone know how they are computing this insane 50% penalty and if there is any chance of mercy on it.

In a nutshell, I started off with my friend owing $16,000 ($4,500 of which they already siezed) in CA state taxes. I was able to get that $16,000 reduced to $3,200 owing meaning he got $1300 of the previous $4500 collected back. All in all, I think I have won the war with the state of CA. Some people might say leave it alone and be happy.

I say if I would have just been happy in helping my friend get his money back and straighten out his affairs, most likely I would have given up a long time ago. My goal is I would like to see another $1000 to $1500 back from the state. I am not saying they cannot collect interest but $1700 on $260 is insane. And come on, 50% on top of that, the mafia does not even do that.

I would ask this. I am looking for some help. If you feel like you want to respond in some negative way, don't even bother. I want solid advice that I can use. Maybe I have overlooked something in all this.
 

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