Form 945 and estimated IRS assessments

[kpangelinan]

Does anyone have any experience with Form 945? I've recently had a client assessed with estimated taxes from the IRS (he's supposed to withhold?) for income paid to subcontractors and not 1099'd.

How does this get resolved....if the recipients were truly subs, how is this addressed with the IRS?. The years in question are for 2003 and 2004.

Thanks for any help.

[BOB W]

While I didn't read the full instructions, this would come into play if client was notified of a mismatch from a prior 1099 filed and client continued to pay a subcontractor with incorrect info without withholding: OR a current sub that refused or didn't provide SS# and client should have withheld 10% or some other % required.

The circumstances could also be different than above that the IRS is looking for the 945 to be paid and filed. Sounds like the client did something that he/she should not of done.

Here is the 945 instruction:

http://www.irs.gov/instructions/i945/ch01.html

IRS is going after your client because they can't collect from the sub due to closed years. But if the amount is high enough (fraud), the sub could get opened up.

Now if it is that old, why is the client being opened as well???? Fraud here also?

ADDED: Unfiled 1099's, does that leave the 2003 & 2004 years open for that issue?????

[kpangelinan]

Thanks Bob!

While I didn't read the full instructions, this would come into play if client was notified of a mismatch from a prior 1099 filed and client continued to pay a subcontractor with incorrect info without withholding: OR a current sub that refused or didn't provide SS# and client should have withheld 10% or some other % required.

The circumstances could also be different than above that the IRS is looking for the 945 to be paid and filed. Sounds like the client did something that he/she should not of done.

Here is the 945 instruction:

http://www.irs.gov/instructions/i945/ch01.html

IRS is going after your client because they can't collect from the sub due to closed years. But if the amount is high enough (fraud), the sub could get opened up.

Now if it is that old, why is the client being opened as well???? Fraud here also?

ADDED: Unfiled 1099's, does that leave the 2003 & 2004 years open for that issue?????

Bob, thanks for the reply....I'm bumping this to see if anyone can add.

To answer your questions: I've been preparing this guys corporate and personal returns since 2005 and I don't see any fraud since then, but am unsure prior to that (I know these people and just don't see anything fishy here). He was audited for 2003 and 2004 years for his corporation before I came into the picture and according to the client (again, unsure as to reliability of information, just taking his words) the RO wanted them to provide W9's for each of their subcontractors for both of those years in order to prepare 1099MISC's (Box 7 non-employee compensation) for them. They rec'd some and not all as some moved away, died, and some simply refused. That was the end of the audit until this past year when they started receiving these past due notices for form 945 for both of these years. I spoke to the collection RO handling the case now and he has no clue what happened and told me that he is only handling the collection part of it and doesn't have any information or knowledge of the case prior. He mentioned we could have a CDP hearing on the case. He didn't have any other suggestions as to what we could do as suspected.

By the way, the client has been current since 2005, all corporate and personal returns filed and paid. There has been no audits, personally or for the corporation since I've been with the client.

Anymore thoughts?

Thanks again for your help on this.