Setup...Been unemployed for way too long.  Had some credit card debt I decided to settle.  And have used money from 401k to make ends meet.

Long story short, I paid very little to the state in income taxes during the 2009 calendar year, not nearly what they wanted come Apr 15, 2010.  For those that are not aware, if you settle credit card debt for less than 100% (say 60%), then the credit card company reports 40% as income on a 1099.  Most everyone is aware, taking money out of a 401k is considered income (there is also a penalty at least at the federal level).  Also, if you owe more that $500 in taxes to the state of Illinois on tax day, you will be assessed a penalty.

So, I file and PAY my taxes in April as every good taxpayer should.  In June, I get a letter from IL Dept of Rev (IDR) indicating that I have been assessed a penalty for not paying enough taxes during the 2009 calendar year.  I received the letter 2 weeks after the date on the letter.  I call and an informed that I can appeal the penalty by writing a letter stating the reasons for the appeal.  I do that on the same day and it is mailed the following day (Jun 22).  During the conversation, I'm told I will not hear anything back until the appeal is considered and that no further penalties will acrue.

In late July, I receive a notice that my account is going to collections and the amount due is $30 more due to being late.  I call again and am told "I can see there has been some action on your account in early July and I don't know why they wouldn't have put your account on hold."  He asks that I fax him a copy of the letter.  Again, I told I will not hear anything until the appeal is reviewed.

Last Friday (8/13) I received notice that my appeal have been denied (apparently you have to be a governor to get special consideration) and that the $30 late charge is also still due.  This led to the call yesterday where what I really wanted to do was pay by phone the original penalty amount.  Joann asked why not the whole amount and I gave breif summary.  I then asked if she could remove the penalty, and no she doesn't have the authority.  So I was commenting that the routing of the letters seem to take some time within IDR, so she tried to explain how correspondence is handled (I now know the reason Illinois has financial problems) going from one location to the next until it finally reaches the intended recepient.  We went around this path a couple of times when I said "why should the taxpayer be burdened with the inefficiencies of Springfield?"  And then "In other words, because it takes so long for my letter to reach the right department, that I incurred a $30 penalty.  For $30, I could have hand delivered the letter in 1 day."  This banter went on for a few minutes until she just hung up.

I have mailed a payment for the original penalty and written another letter about the late charge penalty.


UPDATED 9/24/2010: Received a letter from IDR today (dated 9/16/2010) stating that the $30 penalty has been abated and my account now has a balance of $0.00.