Tax help - Massachusetts - for anyone willing

Parent Cafe
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<p>My daughter just found out that she made a mistake filing her 2008 tax returns, and the state of MA says she owes them about $700. In 2008, she worked over the summer in California, but the rest of the money was earned as a grad student stipend in MA from Jan-June, and Sept-Dec.</p>

<p>She filed a “regular” MA state tax form and a “part time” form in CA. Apparently she should have filed a part time form for both states, because MA says that because her federal form and her MA form don’t match, she owes them the difference. Her reasoning was that because she is truly a full-time MA resident, she should fill out the regular form. It was an error, but an honest one. She paid the summer taxes to CA.</p>

<p>This can be fixed, apparently. There are forms she can file to make a claim to show that she paid the missing tax to California where she was employed. She also needs to send a copy of her 2008 CA return with these forms. Unfortunately, she doesn’t have a copy of her CA return. (dumb, $#&*, dumb) She says she can request a copy of her return from CA, but it will take four weeks and $20. </p>

<p>What makes her nervous is that she just found about this problem because she moved this summer to be a permanent CA resident, mail was not forwarded in a timely fashion, and the deadline for paying the $700 is in two weeks. So there’s no way she can have all of the info to the MA tax board before the deadline for payment, although she could have much of it, minus the CA return.</p>

<p>Our question is, does she have to pay the 700 before the deadline to avoid penalties, or will filing these claims and a copy of her CA pay stubs along with a note that the CA return will be coming soon suffice to keep from being delinquent?</p>

<p>My thought is that she should go ahead and pay the money and also file the forms and request a return of the funds, even knowing it will take a long time before she sees the 700- perhaps months. But at least she will not be delinquent and she will avoid penalties. Dd’s hope, being a young adult for whom $700 is a ton of money,is that filing the paperwork will keep her from being delinquent. I am doubtful, and I think she’ll have penalties. </p>

<p>I’ve looked online and can’t find a satisfactory answer. We will probably contact our own tax accountant and see what they say, but I’m not sure that a CA tax person would be familiar with MA laws. Tomorrow I will contact or have her contact the MA tax board directly and see if they can tell her. Even if they say yeah, go ahead and file the claim and it will be ok, I’m not sure I’d trust it. What do you think? Any insight would be appreciated.</p>

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<p>Can you find the CA 2008 forms on-line and just fill them out again, rather than wait to get a copy from CA?</p>

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<p>moonchild - I don’t have any advice for you. But I do have some thoughts and observations. The first you already know. Your D needs a quick primer on federal and state tax bureaucracies … what they expect from taxpayers, why they seem so anonymous, and where the internal ombudsmen reside. Yes she should have kept a copy of her return … no, CA will not be enthusiastic about finding and mailing her a copy … etcetera. Unless she’s a very lucky young woman, this won’t be her last conflict with tax authorities. I’m VERY careful, and I’ve had several quarrels over the years.</p>

<p>Here’s what I’ve learned from those quarrels: First, the tax authority’s complaint may or may not be correct. It sounds like it’s NOT correct in your D’s case. Second, tax authorities know that many of their complaints are not correct. If the amount “due” is small and the explanation reasonable, that may put the matter to rest. To do this of course, she needs to speak with a representative in the Mass Dept. of Revenue, and get them to request a letter of explanation … rather than a series of forms.</p>

<p>Or, she might elect to simply refile her taxes using the correct form. Peruse the MA part-year form and you’ll see there is no requirement to even identify CA as the state your D worked in part of the year.</p>

<p><a href=“http://www.mass.gov/dor/docs/dor/forms/inctax11/f1-nrpypdfs/nr-py.pdf[/url]”>http://www.mass.gov/dor/docs/dor/forms/inctax11/f1-nrpypdfs/nr-py.pdf&lt;/a&gt;&lt;/p&gt;

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<p>People make mistakes all the time when they file returns after moving or when they live or work for a period in another State.</p>

<p>In 2008 what was her official State of residence?</p>

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<p>I don’t believe that whatever penalties and interest may ultimately be owned will have much of anything to do with whether she gets this resolved in the next two weeks. They probably put the date on the form to make her think this is some urgent matter.</p>

<p>The suggestion to simply re-file with the proper part year form is a good one. The issue here is that Mass is seeing income from the federal return that is not declared on the Mass return – because there is no line on the form to declare income from another state. I would probably just call the Department of Revenue and tell them this is what she is in the process of doing.</p>

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<p>Is the penalty a percentage of the tax that they think is due?</p>

<p>Because if it winds up that she really owes no tax, then the penalty will be zero as well.</p>

<p>CA forms are on-line here: <a href=“https://www.ftb.ca.gov/forms/search/index.aspx[/url]”>https://www.ftb.ca.gov/forms/search/index.aspx&lt;/a&gt;&lt;/p&gt;

<p>The 540NR short form looks pretty easy.</p>

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<p>In terms of penalties:
In at least some states (and with the Feds, I think) if one makes an error “in good faith” - ie an honest mistake with no intent to defraud - when filing a tax return then penalties and sometimes even interest will be waived.</p>

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<p>In terms of MA penalties … I wasn’t going to post this, since I don’t think the OP’s D will need to pay them. But here it is anyway, just FYI:</p>

<p>[Assessment</a> of Penalties - Massachusetts Department of Revenue - Mass.Gov](<a href=“http://www.mass.gov/dor/individuals/filing-and-payment-information/guide-to-personal-income-tax/assessments-interest-and-penalties/assessment-of-penalties.html]Assessment”>http://www.mass.gov/dor/individuals/filing-and-payment-information/guide-to-personal-income-tax/assessments-interest-and-penalties/assessment-of-penalties.html)</p>

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<p>^ All the penalties I see in there that might apply are a percentage of the tax due, and accrue at 1% per month up to 25%. </p>

<p>So even if she winds up owing tax and is a couple of months late, the penalty will be miniscule.</p>

<p>Disclaimer - not a tax expert.</p>

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<p>You can also ask that penalty charges be abated. Interest is generally statutory.</p>

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<p>Penalties and interest that we have paid in HI & to the IRS are generally on the taxes/amounts due. Since the amounts she would have earned would be fairly low when she was a student and tax on that even lower, the penalties & interest would accordingly be lower still. Would try to not stress over this. Also, since this is an honest mistake, would see what can be waived by talking with MA revenue folks. Disclaimer, also not a tax expert & don’t even do our own taxes. Have paid penalties & interest many times though. Most recently, we paid $6 penalty for improperly estimating our taxes (yes, for an entire year).</p>

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<p>Bottom line: She declared all the income she earned in Mass on her Mass return. So, when all is said and done, she is not going to owe any tax and, therefore, is not going to owe any penalities or interest.</p>

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<p>Heck, she might even get a refund! Would definitely not worry about it–have her file the corrected form & see how things play out.</p>

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<p>Thank you all for your replies. We’re trying to process it all and determine the best course of action. Apparently there is a Schedule she should have included that would have told MA that she filed the summer taxes with California and acts as a “credit”, which is mentioned in the instruction booklet that now, at least, is online. (Schedule Z) If it’s as simple as refiling correctly now, that will be great. Not sure if that’s what we should do, however.</p>

<p>She originally filed as a resident. This made sense because she lived in the state most of the year, was a full time grad student and expected to continue to live there for several more years. When she contacted the tax rep in MA after receiving the notice, the rep told her she should have filed the Non-resident form.(?) What Dd took away from the conversation is that she needs to fill out the Non-resident form, fill out Form C-A, which is an Application for Abatement/Amendment Return, and also send them a copy of the CA tax form she filed that proves she filed with them.
My concern is that the conversation she had with the rep may not have been an example of great communication on either side. Did Dd really explain her case well, and therefore get the right information? Why did the rep think she should have filled out the non-resident form? I don’t know. Looking at the info booklet, if you have a domicile that you live in for more than 183 days, you’re a resident.</p>

<p>It seems there are two approaches.

  1. She re- files the Resident form with the correct information, reports all income --not just income earned in MA like she did the first time, along with the Schedule Z to show CA taxes reported , and also fills out the Abatement Form to explain.</p>

<p>2) She files the Non-resident form, fills out the Abatement Form to explain, and sends for a copy of her CA return where she reported the summer earnings when she finally receives it (four weeks, according to the website.)</p>

<p>Option 1 makes the most sense, but option 2 are the instructions Dd took away from her conversation with the MA tax rep. It’s difficult because I don’t know how valid the rep’s suggestion is because I don’t trust that Dd understood the issue well enough to explain her case.
There is a third option, I guess, which is do what the rep suggested, and send the Non-resident and Abatement form, but also include the Schedule Z that shows the taxes filed in CA. Or would that just be too confusing?</p>

<p>I wish Dd had consulted us before she talked to them, but understand she was trying to get as much info as possible and handle it. I may try to call the MA DOR myself and see if they would help if I ask how to proceed as a hypothetical. I know they won’t talk to me about her specific situation.</p>

<p>I really do appreciate all of the above feedback. Thanks.</p>

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<p>Yes. I think this would be the simpler of the two approaches. I would certainly do the math on this one first. File a full year Mass resident, show all income (including the income from the temp job in California) and then file Schedule Z to get the California tax applied as a credit to her Mass tax bill. This will quite likely result in a Mass refund because I suspect the california tax is higher than the Mass tax on that income, but who can predict.</p>

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<p>That would be a cleaner way of doing it that being a Mass resident, then a California resident, then a Mass resident again all in the same year, especially since she probably did not change her legal residence (drivers license, voter registration, etc.).</p>

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<p>I’ve dealt with the Feds and a state 3-4 times about tax issues and it was VERY frustrating chiefly because of inconsistent descriptions from “officials” about what I needed to do … the web, the written instructions, answer #1 on the phone, and answer #2 on the phone often did not match. Do you have a family friend or aquaintance who is an accountant or an H&R Block person? Maybe someone at your daughter’s school who has been through a similar situation? Anyone who could provide some guidance?</p>

<p>PS - despite my frustration with the process at the end of the day the IRS and state folks I’ve dealt with (including MA) have been more than fair in the final resolution of my situations … small potato problems with no intention to cheat.</p>

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<p>Thanks Id dad :</p>

<p>I like option #1, but I’m worried that if she just goes with it after the conversation she had with the rep (there would be records, I imagine) who told her differently, there might be problems. She did move from one MA apartment to another after her stint at home during the summer. I can see how that fits the Part-Time resident profile. It certainly would be the way to go for the following two years where she had one permanent apartment (09 &10) and she filed as a resident those years. She didn’t work in Ca over the summer those years-stayed in Ma- so hopefully there won’t be any problems down the road. </p>

<p>3togo- thanks for commiserating. My Dh left a message with our own accountant who has done our taxes for years, but she hasn’t returned the call yet. If she would just “handle it” I’d be happy to add it on to our normal bill, but even if that were possible, it wouldn’t be the best learning experience for Dd. Like one of the previous posters mentioned, this will probably not be her last issue with the tax folks, and if we can help guide her through this one, next time she’ll might be able to do it on her own. I just wish my Dd wouldn’t be so down on herself for creating the problem. Granted, it was a problem of her own making, but we’ve all made mistakes. At least this one isn’t hurting anyone else and it is fixable. I think the fact that she just went through two consecutive instances of identity theft- one in undergrad and one as a grad- and spent months trying to get that straightened out, this new problem is very unwelcome and seems bigger to her than it actually is.
But then, who would welcome this problem? lol…</p>