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easy_NewJersey · Sep 6, 2008, 10:39 PM

Since we are retired, we did not have much income throughout the year 2007. However. In Dec 2007, I did a few Roth conversions which added substantially to our income. I promptly paid 100% of our 2006 Federal and NJ taxes to Federal and NJ as Estimated Taxes for 2007 before January 15, 2008.

Now I have been receiving notices from NJ stating that the Estimated Taxes should have been paid in 4 installments and I owe interest since I did not do it that way. I keep replying that IF I HAD NOT DONE THE ROTH CONVERSIONS IN DEC 2007, THERE WOULD HAVE BEEN NO NEED TO PAY THESE ESTIMATED TAXES AT ALL!! How could I predict in April 2007 that I was going to Roth Conversions in Dec 2007? The earliest I could pay Estimated Taxes after the Roth Conversions was in Jan 2008, which I have done.

But NJ Tax Authorities do not seem to read my reply or bother to analyze. They keep resending the same form letter to me. When I called them, I was told that "maybe they will understand it better if you enclosed Form NJ2210". (NJ 2210 is UNDERPAYMENT OF ESTIMATED TAX 2007 BY INDIVIDUALS, ESTATES OR TRUSTS). That form is for use by professionals. It is not easy to fill out.

By the Way IRS are not complaining about interest on their Estimated Taxes. Why is NJ complaining?

Any suggestions on how to deal with the situation?

ebaines · Sep 8, 2008, 06:13 AM

Form 2210 is not easy to fill out, true enough. However, that's the only way to document the timing of your income throughout the course of the year, to show that you did not underpay in April, June or September. It will show that the penalty you owe is $0. If your other sources of income were constant, you can just divide the total income from them by 4 for each quarter. But if you had other one-time payments (such as capital gains) you will need to document the proper timing of them. You may want to consider consulting a professional if you are uncomfortable with how this form works.

AtlantaTaxExpert · Sep 8, 2008, 11:05 AM

Ebaines has a point. Forms like Form 2210 or the New Jersey equivalent are NOT designed for the layman, but do not pose a serious problem for the professional who routinely deals with them.

In my opinion, it may make sense to pay the fee to get a tax pro to prepare the Form NJ-2210 just to get the NJ tax authorities off your back and to prevent some rather nasty consequences should the NJ tax authorities decide to initiate a collection action.