Notices like these make my hair stand on end (and I have limp hair) because we are careful taxpayers. According to the notice, we failed to pay what we owed on in 2011 for "Personal Use," meaning in-state sales tax we owed for our out-of-state (or online) purchases. But I am certain we did pay it. It was one of the more annoying aspects of filing with TurboTax these past few years — we had to figure out how to trick the software in calculating the correct amount. I blogged about it here. And that same amount also appears in the correct spot on our filed return, of course.
The notice felt like déjà vu. I went looking in our files and, sure enough, at the front of our 2010 tax file I found a similar notice from last year, declaring the exact same tax liability. On that one, I'd helpfully written down the explanation: We did pay the tax but the DOR "accidentally" refunded it to us, sending us a bigger refund check than we'd calculated on our return. Since refund checks arrive weeks or months after we send the tax forms, we no longer remember the correct amounts; we just assume the IRS and the DOR are refunding us correctly.
But the DOR is not. This is the second time they've sent us a check for too much money, and then fined us and charged us interest because of what they did. Do you find that suspicious, as I do? Hmm. If the DOR did this to, say, a half-million taxpayers, they'd make millions of bucks from everyone with those penalties and fines. Even a few dollars per taxpayer would quickly add up.
Possum shares my conspiracy-theorist tendencies. He's aghast.
We don't mind paying the "safe harbor" amount of "personal use tax," which the DOR has calculated for our income bracket — even though some say it's illegal taxation for a state to demand sales tax on purchases from other states. Lawyers and better-informed citizens are welcome to duke it out with the DOR. We'll keep paying it in the meantime.
We just don't want to keep paying it twice.
I suspect that a lot of people don't bother to pay this tax, since Massachusetts expects us to be on the honor system; it's probably instinctive for some to claim they never buy anything out-of-state or online. Such people would think that only Boy Scouts and suckers (like us) obediently pay a tax we're supposed to estimate ourselves.
Maybe the DOR thinks we're gullible, too. I'll call them tomorrow to straighten this out, and I'll be darned if we're paying their fine and interest. We paid the tax, on time. They chose to give it back. Not our fault.
In our tax file for next April, I've just added a sheet of paper, warning us (in big, bold type) not to cash our Massachusetts refund check without double-checking the amount against our return. This kind of mistake shouldn't have happened twice, yet it won't surprise me if they try it again next year. Fool me once...
UPDATE: I called the DOR and was told they've been hearing from others about this. All we need to pay is the original tax amount, again — no penalty or interest. Apparently, it was a computer glitch and the DOR is not out to grift extra money from unsuspecting taxpayers (although its computer system has been trying its darnedest, two years in a row). I was also told that most people do pay this tax, even though it's on the honor system.