I underreported my income on my 2009 tax return. It was money from an external research fellowship, and I both realized and didn't realize what I was doing.
When I'd had fellowship income in the past, I'd tried to report it but had nearly always had a difficult time doing so: I wouldn't receive tax forms from the granting institution in January, and when I'd call they'd persist in not sending me tax forms. Twice I was referred to an office with a phone line that was never attended and on which I couldn't leave a message. Upon digging through my award notifications, I would also find ambiguously-worded statements such as, "this may or may not count as income and may or may not need to be reported to the Internal Revenue Service."
Nevertheless, I dutifully but half-assedly reported the income. Since I hadn't received a 1099 form, I didn't have a tax I.D. number or a proper address, but I listed the dollar amount and some version of the institution's name. And every time, I owed a chunk of money for my pains.
Based on this lackadaisical institutional reporting, I more or less came to the conclusion that fellowship income must not really need to be reported. The institution that awarded me a fellowship in the winter of 2008-09 also did not send me a 1099 form, and this time I didn't bother to try to track one down. Their checks and check receipts had suggested that they were deliberately underreporting what they paid me, so I figured that if there was a tax loophole here, they were definitely taking it.
Also, it was a decent amount of additional income. I would have owed hundreds of dollars rather than getting back hundreds of dollars. So I didn't report it.
When I got the notice of underpayment from the IRS this past spring, I acknowledged its justice: I owed $1,000 in back taxes, plus $37.00 in interest. I wasn't happy about it, but I knew that I was the one at fault. I called the IRS immediately to see whether I could pay in installments over the 90-day window I was given. They told me that I could, and I wrote a check for $350.00 that night.
But it didn't turn out to be so easy. The Treasury Department has been cashing my checks and then, a week or two later, cutting me checks for the same amount (plus interest!): "OVERTAX REFUND," they tell me. I kept sending them checks, for increasingly large amounts, until last month I paid the full $1,037.00 in one lump sum. Last week I got a letter by certified mail telling me that I was delinquent in my repayment. I called, and was told that it was probably an error, since my account had been credited. Yesterday I got a refund check for $1,037.91.
Graduate school did nothing to prepare me for this.