Payroll Tax Penalties When The Irs Sends A Letter

Payroll Tax Penalties When The Irs Sends A Letter



Payroll Tax Penalties,​ When the​ IRS sends a​ Letter.
Payroll Taxes are Due,​ with Penalties and Interest
At least that is​ what the​ letter from the​ IRS says .​
First thing,​ don’t panic .​
Quoting Daniel J .​
Pilla’s study for the​ Cato Institute About 40 percent of​ the​ revenues the​ IRS collects through penalty assessments are abated when citizens challenge the​ penalties.
So we now know the​ odds are good that the​ IRS is​ wrong or​ will blink first .​
What do we do?
The normal problems with payroll taxes are.
Failure to​ File.
Taxes under reported.
Taxes under deposited.
Taxes deposited late.
Any of​ these can create a​ situation where the​ services charges penalties and interest against a​ business and then sucks up subsequent tax deposits creating additional late and short payments simply exacerbating the​ situation .​
We will get to​ that later.
Read the​ notice from the​ IRS .​
It should tell you​ why they are charging a​ penalty and interest and how it​ is​ calculated .​
If the​ notice does not lay out that information,​ you​ have missed the​ first notice from the​ IRS .​
That is​ not at​ all unusual .​
If you​ don’t have the​ first notice call the​ IRS and get all the​ information from them .​
Also ask them to​ fax you​ a​ Statement of​ Account for the​ period and type of​ tax in​ effect .​
This will show you​ what they have on​ the​ IRS file,​ without regard to​ whether it​ is​ correct or​ not.
Failure to​ file .​

The IRS says you​ never filed a​ return and they have created a​ return for you​ .​
They will estimate taxes due in​ an​ amount they know exceeds what would be reasonably due based on​ your account .​
They do this to​ get your attention .​
Many people,​ if​ the​ estimated amount were too low,​ would just pay it .​
the​ IRS does not want that to​ happen so they always over estimate if​ they create a​ Substitute Return and file it​ for you.
The answer to​ that is​ to​ send a​ copy of​ the​ return .​
If you​ filed it​ certified mail send a​ copy of​ the​ receipt when it​ was sent proving the​ date and a​ copy of​ the​ return receipt showing it​ was received .​
One tip is​ never sending more than one return in​ an​ envelope .​
the​ clerk opening the​ envelope may staple them together and only the​ top return will ever be reported as​ being received .​
If you​ didn’t send it​ certified in​ your accompanying letter talk about your history of​ filing on​ time and this one was surely just misrouted .​
If you​ have collateral proof of​ the​ filing date like a​ cancelled check that was sent with the​ return quote that information or​ even include copies .​
If the​ return was due on​ the​ 15th and the​ check attached cleared your bank on​ the​ 18th that is​ pretty convincing that the​ report was actually there by the​ 15th.
Taxes under reported.
Find out why they say that .​
Have they transposed a​ number when they hand entered the​ return? That happens with regularity .​
Have they just pulled a​ number out of​ their hat? That happens periodically .​
Once we received two notices for two different customers on​ the​ same day saying they had overpaid their 940 taxes and offering them each a​ refund of​ over $36,​000.00 each .​
the​ total 940 tax deposits for the​ two clients combined were less than $2000.00 .​
And no,​ I​ did not let them apply for and receive the​ checks.
Again send the​ IRS a​ copy of​ the​ return that you​ filed .​
If the​ return is​ wrong then send the​ IRS a​ corrected form such as​ a​ 941-C to​ correct the​ original filing .​
For instance,​ if​ you​ put second quarter figures on​ the​ third quarter report .​
There won’t be a​ penalty for late filing if​ in​ fact you​ filed an​ original return on​ time even if​ it​ was incorrect .​
a​ tip is​ if​ you​ cannot prepare the​ actual return on​ time,​ estimate it​ and file it .​
Then file a​ corrected return when you​ can,​ this avoids a​ late filing fee.
Taxes under deposited .​

They say you​ made fewer or​ smaller deposits than you​ reported .​
Check their list and dates of​ deposits against yours .​
Don’t accept their word for when it​ was made .​
you​ have the​ proof in​ your files .​
We have noticed a​ real problem recently .​
EFTPS payments are not being shown with the​ date in​ the​ electronic file the​ same as​ on​ the​ IRS Statement of​ Account .​
How some programmer messed that up is​ beyond me .​
So prepare the​ data showing your proof that the​ payments were made on​ time,​ bank deposit slips,​ EFTPS confirmations or​ whatever proof you​ have .​
Package up copies and send them to​ the​ IRS with a​ letter of​ explanation,​ and a​ request for them to​ update their records.
If in​ fact you​ missed a​ deposit,​ it​ happens,​ make it​ immediately and ask for abatement anyway .​
Site valid reasons why the​ deposit could have been inadvertently missed .​
Discuss steps you​ have taken to​ make sure it​ won’t happen again.
Taxes deposited late.
See taxes under deposited and do the​ same thing with dates .​
Document and send letters .​
Don’t give up .​
Just because the​ first person at​ the​ IRS turns you​ down literally means nothing .​
They almost always turn down the​ first request for abatement of​ a​ penalty .​
Dealing with the​ IRS is​ a​ long series of​ no’s followed by a​ single yes .​
When you​ do get the​ yes,​ shut up and walk away.
One of​ the​ favorite tricks of​ the​ IRS involves a​ string of​ deposits .​
Let’s say you​ were suppose to​ make 12 deposits of​ $1000.00 each the​ 15th of​ each month starting Feb 15 and ending Jan 15th for January through December .​
the​ second deposit is​ missing,​ and the​ check never got cashed .​
you​ don’t know what happened .​
the​ IRS will take the​ third payment and apply it​ to​ the​ second month’s taxes but it​ is​ late so they charge a​ penalty .​
Now the​ fourth month’s deposit gets applied to​ the​ third month’s taxes but it​ is​ also a​ month late so there is​ another late paying penalty .​
you​ will quickly have 10 late payment penalties and the​ 12th month penalized as​ not being paid at​ all .​
the​ penalties exceed the​ taxes missing .​
the​ service cannot due this though they will try .​
If you​ designate the​ third deposit for the​ third month taxes they must apply the​ payment there regardless .​
If they don’t record them that way you​ can force them to​ do so,​ it​ is​ their regulations that say they must follow it .​
Accept the​ penalty only on​ the​ one month and then ask for abatement anyway .​
If you​ have never had a​ late payment the​ IRS is​ suppose to​ give you​ a​ free one anyway.
If you​ have a​ valid business reason that a​ penalty has occurred in​ spite of​ good due diligence on​ your part the​ IRS is​ suppose to​ abate the​ penalty .​
Understand that IRS employees may be gauged by how much revenue they bring in​ (the IRS vehemently denies this but ex IRS employees don’t always) .​
When that is​ true they don’t want to​ abate penalties regardless .​
Another trick they have is​ to​ offer a​ reduced penalty as​ a​ favor,​ when in​ fact they should have zeroed it​ out .​
Or they will offer to​ abate penalties on​ two quarters if​ you​ pay the​ third .​
It is​ normally not a​ good idea to​ accept these offers .​
you​ can do better .​
Keep writing letters and filing documents at​ the​ higher and higher levels until one person gets reasonable and says yes .​
Then take that yes and run.
Can an​ ordinary citizen do this? Sure! is​ it​ easier for a​ payroll tax professional? Sure! the​ IRS is​ far more likely to​ listen to​ a​ CPA than a​ citizen .​
the​ CPA knows what buttons to​ push and how to​ go to​ the​ next level .​
An ordinary citizen may not .​
the​ CPA is​ far less likely to​ get emotionally involved than the​ citizen whose pocket is​ being emptied.
Your payroll service provider should have CPAs on​ staff to​ handle these situations for you​ .​
If not,​ seriously consider a​ payroll service provider that does .​
Because when,​ not if,​ the​ IRS crews up your regular CPA will charge you​ full rate to​ solve problems that should be solved by your payroll provider for free.




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