My state has sent a large tax bill with a stiff penalty

My state taxing agency has sent me a bill. They assessed me with a large tax bill and on top of that they’ve included a stiff penalty.

This is called a “statutory” filing, meaning that the state gets information from other parties (most likely the IRS) and files a return for you. Because it’s based on outside, third party info, it is most likely inaccurate. You can put together your return and file it to more accurately represent the true state of your income and expenses. If the amount is still too much to pay all at once, you might need to look into filing an installment payment plan. While IRS is often more flexible, state agencies are more rigid, typically wanting the payments made within 1 year (12 monthly payments).

The key here is challenging the penalty assessment. You have options in how to do this; getting advice from a seasoned professional will help you enormously here.