We got a letter saying we did not pay estimated taxes and owe a late fee, but we did pay - taken out of our bank account after filing an extension. please advise.

[Critter]

Ok ... the underpayment penalty which is being charged  is applied if you don't pay your taxes quarterly.  This is applied even if you pay the entire amount with the return or extension in April. If you had not paid the total balance due with the extension then you could have ALSO been charged with a failure to pay penalty. 

[Rainman12]

Restated: Payment in full is Not sufficient; Payment must also be Timely, proportionate to when income was realized.

[kimberlyglass506]

not helpful because the problem is that we owed $5000 and they are saying we didnt pay that.  we dont pay quarterly taxes- we are both employees who have taxes paid per paycheck.

[SteamTrain]

...so is the new bill for $5000 PLUS late fees, or just the late fees?

[VolvoGirl]

Did you make a payment with the extension?  It should have shown up on 1040 line 70.  Is it there?  And you have  proof it was taken out of your bank account?  Maybe it was applied to the wrong type of payment.  Like to a 2017 estimated payment instead of a 2016 tax due.   Is the bill just for more interest or penalty?  That is common for them to send a bill for interest depending on when they got your payment.