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Richard, Tax Attorney
Category: Tax
Satisfied Customers: 55308
Experience:  29 years of experience as a tax, real estate, and business attorney.
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Principle Financial group was instructed to deduct taxes

Customer Question

Principle Financial group was instructed to deduct taxes from a retirement account that was being closed & I chose to collect rather than roll over. They had no idea how much my "pay out" would be but I told them I wanted state & federal taxes deducted.
I received my check & spent it on bills. A couple months later I received a letter saying they forgot to deduct it and to send them a check for over $3000. I didn't have it. So, at tax time I was not only in a higher tax bracket, but lost my right to file
for homestead credits but got taxed that amount. It is my premise that they are paid financial professionals who didn't do as they were advised by me as their client. I say that in small claims I should be able to recover something because of their error.
Am I right to file a small claim against them hoping to get SOMETHING, or should I save my money?
Submitted: 2 years ago.
Category: Tax
Expert:  Richard replied 2 years ago.
Hi there. Can you provide me a bit more information? Can you help me understand how this caused you to be in a higher tax bracket? And, how it impacted your ability to tile for homestead credits? Thank you!
Customer: replied 2 years ago.
Well I assume adding $10000 to my normal income of $20000 put me in higher tax bracket. My tax man, whose name & number I can provide told me about not being able to claim some items. It also lowered what I get for a refund & usually use towards my property tax. Also effected grants for school and low income living assistance.
Customer: replied 2 years ago.
I use Jerry's Tax Service in Baraboo WI
Expert:  Richard replied 2 years ago.
Good morning. Can you tell me your filing status....married filing jointly, married filing separate, head of household, single? Thanks
Customer: replied 2 years ago.
Single head of household
Expert:  Richard replied 2 years ago.
Thanks for your response. This extra income should not have put you in a higher tax bracket. For single head of household, the 15% bracket is applicable for taxable income from $12,951 to $49,400. Also, the failure of the tax service to withhold on your withdrawal did not increase your income or the tax amount. It simply resulted in you owing the tax at tax return time rather than having had it withheld from your withdrawal. Thus, their failure to withhold really didn't increase your income or have a net result on any tax owed.
This is the part of my job I don't like...when the law is not in favor of my customer. But, I can only provide you information based on the law so that you can act on the best available information to you. ………..I wish I had better news, but can only hope you recognize and understand my predicament and don't shoot the messenger. I'm sorry!
Thank you so much for allowing me to help you with your questions. I have done my best to provide information which fully addresses your question. If you have any follow up questions, please ask! If I have fully answered your question(s) to your satisfaction, I would appreciate you rating my service as OK, Good or Excellent (hopefully Good or Excellent). I thank you in advance for taking the time to provide me a positive rating!
Customer: replied 2 years ago.
Do you agree or disagree that Principle Financial had an agreement with me to withhold the taxes? It seems that there was an agreement and contract for them to execute the termination of my retirement account. By them not fulfilling their obligation to withhold taxes due, this put a financial hardship on me asking me to come up with $3222 3 months after the contract was executed. When I received my original check I did not know the amount and trusted their financial institution to help me reach a financial goal, not make a hardship for me by leaving me to come up with the amount of tax due. Seems like you missed the point of my question altogether. I'm not asking so much if it put me in a higher bracket but information on their breech of contract. Also, I was NOT allowed homestead credit per my tax advisor. He said it was based upon this.
Expert:  Richard replied 2 years ago.
Yes, I do agree that they are in breach of contract. Your actual damages would be limited, however, due to the fact that had they had the money withheld, you would have received $3222.30 at the time. But, if you can sustain a claim of gross negligence, you could be eligible to receive punitive damages which are not related to the actual damages.
Customer: replied 2 years ago.
How do I file and what should I say in my claim? Is this a small claim matter or how do I go about this?
Expert:  Richard replied 2 years ago.
In what state are you located?
Customer: replied 2 years ago.
Customer: replied 2 years ago.
Sauk county
Expert:  Richard replied 2 years ago.
The instructions as to how to file a small claims action can be found at the following link:
Customer: replied 2 years ago.
Do you feel this is gross negligence on the financial providers part? Also do I originally go for tax amount & punitive? Is there a limit for small claims & does This exceed the limit? Can you please advise best way to advance & handle this as far as arguments? Since you are a tax attorney, please ask for help if needed.
Expert:  Richard replied 2 years ago.
Good morning. It never hurts to include the cause of action for gross negligence; if nothing else, it encourages them to settle rather than risk the gross negligence judgment. In my experience, a gross negligence claim would be difficult to win, but not impossible. Wisconsin has a small claims court limit of $10,000. Gross negligence is defined as "the want of even slight or scant care", and note it as having been described as a lack of care that even a careless person would use."