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CGCPA
CGCPA, CPA
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Experience:  over 40 years experience in tax matters
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I had 2007 tax dispute with the IRS. I just settled with the

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I had 2007 tax dispute with the IRS. I just settled with the IRS and paid a hefty amount including interest and had some penalties waived. Now i am getting hit with a 2007 State tax billl for the ammended return. Question i have is that I settled the 2007 federal tax issue with an AGI # XXXXX DID NOT include this new state tax bill. Now what? Shouldn't the additional TAX i have to pay toward state taxes reduce my 2007 Federal owed tax? But i paid that already. Can I claim the 2007 State tax extra amount on my 2010 return?
Submitted: 3 years ago.
Category: Tax
Expert:  CGCPA replied 3 years ago.

Welcome to Just Answer. I am here to help you resolve your tax and finance concerns. Please feel free to ask anytime you need extra help.

Now that you have settled the issue with the IRS they have, under information exchange agreements, let the state know of their findings. This is "business as usual" for them.

 

The amounts you pay to the state are deductible on your federal return but only in the year they are actually paid not the year to which they applied. You will get the benefit of the deduction just not in 2007.

Customer: replied 3 years ago.
So i paid the IRS $120k including fees in 2007 based on phantom income. Now NY state wants $35k including $6k in interest. So I pay NY State now, and what do I do about my $120k EXTRA I paid in 2007? I paid that already, so do i have to write the IRS and ask for a partial refund. Figure if I deduct $30k from my AGI from 2007 in my bracket it affords me something like $9k in savings. That is $ I am owed from the IRS? How do i get that back? That is my point. Do i need to write them a letter?
Expert:  CGCPA replied 3 years ago.
Unfortunately you cannot apply payments you make to your state now to a previous year's federal return. If you paid NY in 2010 it is deductible on your 2010 federal return, if you pay NY in 2011 it is deductible on your 2011 federal return. It does not get carried back to a prior year even though that was the problem year. A letter will not help and there are no forms to carry back a tax payment. Sorry.
Customer: replied 3 years ago.
OK. That makes sense. Last iteration of this question - can I deduct the TAX + the Interest or just the tax? I assume the date here is the payment date - e.g. when the $ actually hits NY state and not the check date? If i had already written the check last week and send it out today, it was dated Dec 28th, 2010? Could it be applied to my 2010 return? Thanks for your help.
Expert:  CGCPA replied 3 years ago.
First, you can record the deduction in 2010. The check date is the item that determines. However, you will not be able to deduct any interest or penalties. Only the tax amount.
CGCPA, CPA
Category: Tax
Satisfied Customers: 3740
Experience: over 40 years experience in tax matters
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