First penalty bills to be mailed in July

(Washington, DC) The Office of Tax and Revenue (OTR) announced today that it will send out notices to taxpayers who have been automatically charged a penalty for underpayment of their estimated tax. Tax year 2004 estimated tax penalty bills for individuals will be sent out July 22, and business bills will be sent out August 31.

As of January 1, 2005, OTR began to assess a penalty on any person, financial institution or business whenever quarterly totals of withholding plus estimated tax payments are less than the required quarterly payment amounts. OTR will also charge 10 percent interest on any underpayment of estimated taxes.

In the past OTR auditors manually identified any underpayment and applied this penalty. Because of new programming to the agency’s tax system, OTR is now able to find underpayments of estimated taxes and automatically charge penalties.

“The basic tax principle that taxes are due as income is earned is what this new technology was developed to accomplish. Therefore, if the taxpayer’s annual tax liability is not fully covered by withholding or if they have no withholding, the taxpayer must make quarterly estimated tax payments,” said Daniel L. Black, Jr., deputy chief financial officer.