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So way back in 2004, we had a business go under.  To meet our final payroll (including us) my wife and I withdrew from our 401k accounts, without having taxes or penalties withheld.  We filed taxes separately for that year...she owed just over $5k in taxes...I owed just under.


In 2005, we filed jointly, but still didn't have any money to pay what we owed from 2003 or 2004.  In 2006, I found work and she started Social Security.  We set up monthly payments with the IRS for our joint obligations.  Because we no longer had house payments, etc...2006 thru 2010...we always wound up paying an extra $600-$1,000 each March.


Then...in late 2010...we bought a house. No help with taxes for that year, but in 2011, we refinaced.  When I did the taxes for 2011, we actually had overpaid federal by about $1,100.  Whoopee.


Unfortuneatly, we still owed more than that, so the IRS kept our refund.  Last week, I got a letter from the state.  They audited our 2011 return...noticed we had "found income" of $1,100 from a federal tax return...and they want their cut.


I owe the state $80...plus interest.

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