Local Tax Penalty for Not Making Quarterly Payments

[lawyersinlove]

I'll try to keep it short:

Sept. 2006: I start working for my current employer; they do not withhold local taxes.

April 2007: I file 2006 taxes and pay local taxes with lump-sum check.

Mid-2007 (unsure exact): Tax authority sends me forms for quarterly payments, my recollection is that I have the choice to make payments or lump-sum at tax time. I choose to make lump-sum.

April 2008: I file 2007 taxes and pay local taxes with lump-sum check.

Mid-2008 (unsure exact): receive forms for payments, again I'm sure it was voluntary and decide to make a lump-sum payment.

January 2009: Receive notice of new third-party tax collection agency, later receive forms for quarterly payments from new agency. Forms indicate that quarterly payments are required or subject to penalty.

March 2009: I suck it up and make my first quarterly payment to new agency.

April 2009: I file 2008 taxes and pay local taxes with lump-sum check to original taxing authority.

June 2009: I make second quarterly payment to new agency.

August 2009: Original tax authority sends me a bill for penalties incurred by not making quarterly payments. I send the bill back with a note reminding them that my locality is using a third party collector.

Sept. 2009: I receive the bill again with a letter explaining that the penalties are for the 2008 tax year.

It is possible (though I believe unlikely) that I mis-read the forms sent to me, but then why are they not penalizing me for 2007? Also, shouldn't I have received a warning when they didn't get payments throughout the year?

Advice?

[Mr. Knowitall]

There could be a number of reasons. It could be, for example, that they changed policies in 2007. It could be that the "lump sum" option incorporated the penalty. It could be that they only audited your 2008 return....

[lawyersinlove]

Well, this was my own fault. My locality requires quarterly payments and I missed it in the fine print. The new tax authority sent a letter with their forms and stated this requirement in big bold type on both the letter and the forms; so I saw it immediately on the new forms, but missed the fine print on the old forms.