One of our clients made a mistake on his payroll tax deposits: He shorted the IRS $4,590. He realized his mistake, and immediately made a correcting payroll tax deposit (albeit late). There’s a penalty for this, and it’s 10% (based on the number of days his payment was late)–which he paid in advance of an IRS assessment of a penalty.
The IRS assessed a $5,327.46 penalty. That’s a penalty of 116%, quite a bit more than 10%. The IRS sent a penalty notice in late June; my client immediately sent via certified mail a letter questioning the penalty. What did the IRS do? Did they put a hold on collection activities while they investigated? Did they perform the investigation, realize that an error was made, and send a $0 amount due notice? Or did they send an Intent to Levy (CP504B) notice?
The IRS ignored my client’s response and sent the CP504B Intent to Levy notice.
This morning, I called the IRS and tried to get this resolved on the phone. The representative couldn’t–without seeing how the penalty was calculated (which he couldn’t see), he could only note we disputed it and were going to file an Appeal. This afternoon, I submitted that Appeal request online [1].
In the end, my client’s issue should be resolved without him owing additional tax or penalties; the IRS clearly erred. However, my client has to pay me for services that shouldn’t have been needed simply because no one at the IRS did anything with his correspondence. Frankly, the IRS today rarely reads their mail timely or correctly. And that’s a huge issue.
[1] The IRS recently implemented an online upload feature. This allows responding to some notices by upload. I was able to upload all the documents needed for the Appeal (including the Form 9423 Collection Appeals Form) quickly and get an immediate confirmation they were received. This is excellent, and the IRS is to be praised for this. It shouldn’t have been necessary to file this Appeal if the IRS could read mailed correspondence, but at least there are some improvements happening at the IRS.