Elizabeth O. Brower



On July 31, 2015, the Department assessed the Taxpayer penalty for underpayment of estimated tax for the 2014 tax year.  On October 7, 2015, the Taxpayer filed a formal protest of the assessment.  In 2014, the Taxpayer was required to make estimated payment of her personal income tax.  The Taxpayer made unequal payments in April, June and September of 2014, as well as in January of 2015.  The Taxpayer then filed her return and paid the balance of her tax due in March of 2015.  The Taxpayer receives the bulk of her retirement distributions in December of each year.  The Taxpayer does not have taxes withheld from her retirement income distributions.  The Taxpayer’s retirement income has had the tendency to decline from year to year, so the Taxpayer did not know what her income would be in 2014, or if she would receive distributions in a manner similar to her 2013 tax year.  The Taxpayer’s estimated payments for 2014 were paid timely, but were not paid in equal sums and did not add up to the pre-payment requirements of 25%, 50% and 75% of the total required annual payment for the first three installment deadlines, this is what caused the assessment of penalty.   The Taxpayer argued that, based on the fluctuations of her retirement income distributions, coupled with the fact that she used an IRS approved method for calculating the payments, penalty should not have been imposed and should be abated.  However, the Departments interpretation of the relevant statute requires that the payments be made in equal amounts, or penalty is imposed.  Reliance on a federal form does not prevent the Taxpayer from being considered negligent for purposes of penalty.  The Taxpayer’s protest was denied.