Fines + interest for paying city income tax at end of year

[todd vainisi]

It seems the city has decided that paying all of your municipal income tax at the end of the year (instead of in quarterly estimates) is a fine-able offense. Not only are they charging a fixed price fine, but also they charge an additional interest penalty. I'm not talking about an interest penalty on tax evasion (unpaid back taxes from previous years) - this is for paying your current (well, just past) years taxes at the same time as federal and state taxes are paid.

I think this penalty is completely unfair and penalizes different folks at different rates. It also seems designed to be a whammy for people who are self employed or work out of state (because the taxes aren't automatically taken out of a paycheck). I'd like to know what the legal basis is for this fine for paying on time (but not ahead of time).

Doing taxes is already enough of a pain in the rear without having to consider it four times a year.

[Bill Burnett]

The law in Lakewood states that all estimated taxes must be paid by Jan 30th

[Grace O'Malley]

Yes, the law states that you must pay at least 85 or 90 percent of your tax liability before Jan 30. It been that way for as long as I can remember.

Are you new to Lakewood? If you ask nicely, perhaps they can adjust some of the extra fines for you because you weren't familiar with how it all worked? Worth asking.

[todd vainisi]

Not new to Lakewood at all - I've been here 17 years. Not to sound snarky, but your memory must be kind of short. Lakewood hasn't even been collecting the taxes themselves that long - we just broke from RITA 7 or 8 years ago.

The law is ridiculous, I don't even have my w-2s by then.

In a city full of renters who pretend not to live here and other people who dodge paying their tax liability at all, its a slap in the face to fine me for paying my taxes at the same time as I pay them to the other government agencies.

[Jeff Dreger]

I've been here a dozen years and it's been that way as far back as I can recall. (Which might not be saying much, I grant you.) Even before moving here, I've always had to pay quarterly estimates based on the calculations required to be completed in the prior year's return.

I could be wrong, but wouldn't last year's instructions/form have required everyone to calculate and pay the first quarter of the next year along with the remainder of the previous year? If someone's been in Lakewood for more than a year and files returns every year I think you would have to be aware of it.

[Jeff Dreger]

Just checked the city's website and they have forms and instructions back to 2006. The instructions from that year clearly indicate a requirement to declare estimated income and make quarterly payments.

http://www.onelakewood.com/pdf/Tax/L-1% ... 202006.pdf

The feds and state require the same kind of thing if automatic deductions are not taken, if I understand correctly.

[Grace O'Malley]

I'm well aware that we had RITA and I'm also aware that while RITA processed the tax forms for the cities , the tax rates, credit rates, and estimate requirements were under the jurisdiction of the individual city, not RITA. RITA merely administers the collection.

Not to be snarky, but if you haven't figured out how it all works after 17 years ....

[todd vainisi]

Yeah. I'm sorry folks. I shouldn't direct my ire at anyone posting here. But no, you can keep all of your federal and state taxes until April 15th, when taxes are due.

Just tired of being treated suspiciously and like a criminal by the local tax office. And, like I said, I totally disagree with the law and especially the interest fine which penalizes the people giving the most to our city the most harshly. The penalty (if it must exist) should be the same for all of us.

[todd vainisi]

And yes, they did force me to pay ahead last year (and this year) for a quarter. As you can imagine, I was real pleased with that arrangement.

[Tim Liston]

"you can keep all of your federal and state taxes until April 15th, when taxes are due."

That's not true. Both the Federal govt and Ohio require quarterly tax payments for those whose income is not withheld. Just like the cities do. There are "safe harbor" provisions but those usually aren't much help.

That said, municipal taxes here in Ohio are nothing short of a nightmare. The way such taxes are levied vary widely from city to city, including what income is taxed (e.g. Sub S income), how taxes are shared between where you live and work, and how tax loss carryforwards are treated. That's why there is consideration at the State level to at least make things consistent. To which the cities are squealing like stuck pigs because they fear it will result in a loss of income....

[todd vainisi]

Okay, I looked it up and it seems I was supposed to make quarterly estimates to the federal government. However, I worked for myself for years, and never did I do this. I have lots of other self employed friends and the ones I've polled are ignorant of this as well (i know ignorance is no excuse). But I assure you, quarterly payment law or not, the IRS never sent me a fine with interest. Maybe I was small potatoes so it didn't matter to them.

Call me slow to learn, but 17 years in I still feel outraged at paying any sort of a municipal income tax at all. I'm originally from the southwest where people would burn down city hall if they even considered trying to do something like this to people. Most of those states don't have a state income tax either.

I guess if your state has sunshine more than 3 months a year, then you don't need to tax everyone to death.

[Grace O'Malley]

They'll get you one way or another. In states without a local or state tax you'll often see personal property taxes or these awful car registration fees. Some states charge a yearly fee based on the value of the car and it can get pretty expensive. I think Maryland does that.

We have friends in Washington state and they pay no state tax but they have unbelievable sales and use taxes, and weird auto registration and sales fees that we don't have.

[Amanda Tabor]

You are supposed to make quarterly estimated payments to the IRS if you will owe extra taxes -

If you did not pay enough tax throughout the year, either through withholding or by making estimated tax payments, you may have to pay a penalty for underpayment of estimated tax. Generally, most taxpayers will avoid this penalty if they owe less than $1,000 in tax after subtracting their withholdings and credits, or if they paid at least 90% of the tax for the current year, or 100% of the tax shown on the return for the prior year, whichever is smaller.

http://www.irs.gov/taxtopics/tc306.html


I lived in Tennessee for 13 years, there was no local or state income tax on wages (only on dividends and interest over $600), property tax was reasonable (I think I paid around $1100 a year for a 3000 sq. ft. duplex - seemed pricy at the time but compared to here it was a fantastic deal), and sales tax was 9.25% - not great but not much more than here either. Car registration fees were reasonable, similar to here. When I think about all the ways you pay the government here, I'm not sure how they paid for anything in Tennessee!!!