June 17, 2016
Several of our clients have received notices from the Oregon Department of Revenue recently relating to their 2015 tax payments and balances due. The notices assess additional penalties based on underpayment of estimated taxes. If you receive a notice, please let us know so we can investigate before you pay the balance it shows owing.
Oregon requires a taxpayer to estimate taxes due and make sure that enough taxes are paid in over the course of the year. If the tax paid in is not sufficient, then a penalty for underpayment of estimated taxes may be assessed to that taxpayer. To “protect” from penalties, a taxpayer is required to pay the lower of 100% of their prior year’s tax or 90% of the current year’s tax.
The situations where we’ve seen these notices issued have to do with taxpayers who have balances due on their 2015 returns. They paid the amounts due on time by the April filing deadline, but should not have been penalized because they paid 100% of the prior year’s tax over the course of the year. It appears that Oregon is ignoring this rule in some cases and assessing penalties for underpayment of estimates based only on the current year’s balance due.
Our clients should always contact us upon receipt of any correspondence from taxing authorities so that we can assess the validity of any changes proposed. Please do not hesitate to contact the office at 541.388.7888 with any questions.
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