Payroll Taxes are due, with Penalties and Interest. At least that’s what the IRS letter says. First, do not panic Quoting Daniel J. Pilla’s study for the Cato Institute “About 40% of the income the IRS collects through penalty assessments is reduced when citizens contest the penalties.” So now we know that 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
The IRS says that you don’t ever file a tax return and that you have prepared a return for you. They will estimate the taxes owed in an amount that they know exceeds what would be reasonable due to their account. They actually do this to get your attention. A lot of people, if the estimated amount was too low, would simply pay it. The IRS does not want that to happen, so they always overestimate if they create a substitute refund and present it for you.
Taxes under Reported
Find out why they say that. Have they transposed a number when they manually entered the declaration? That happens regularly. Did you just get a number out of your hat? That happens occasionally. When we received two notices for two different clients the similar day saying that they had overpaid their 940 taxes and proposing each one a refund of more than $36,000.00 each. The total of 940 tax deposits for the two customers combined was less than $ 2000.00. Also no, I did not allow them to request and receive the checks.
Taxes under Deposited
They say you prepared fewer or smaller deposits than you reported. Check your list and dates of deposits against yours. Do not receive their word for once it was made. You have the proof in your files. Recently, we have noticed a real problem. EFTPS payments are not revealed with the date in the electronic file as in the IRS Account Statement.
The way a programmer ruined that is beyond me. So, create the data that shows your proof that payments were created on time, bank deposit slips, EFTPS confirmations or any proof you have. Pack copies and send them to the IRS with a letter of justification and a request to update their records.
Taxes Deposited Late
Check the taxes deposited and do the same thing with the dates. Document and send letters. Do not give up. The fact that the first IRS person rejects you literally means nothing. They almost always reject the first request for reduction of a fine. Dealing with the IRS is a long series of not followed by a single yes. Once you get the yes, shut up and go.
Can a common citizen do this? Of course! Is it easier for a payroll tax professional? Of course! The IRS is much more likely to hear a CPA than a citizen. The CPA knows which buttons to press and how to move to the next level. A common citizen cannot. The CPA is much less likely to get emotionally involved than the citizen whose pocket is being emptied.
Your payroll service provider must have CPA on staff to handle these conditions for you. If not, seriously consider a payroll service provider that does. Since when, not if the IRS prepares your normal CPA, you will be charged a full fee to solve the problems that must be solved by your payroll service provider for free.…Read More