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Payroll Penalties

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    Payroll Penalties

    Client has not filed 941 for Q3 and Q4 of 2005. Has not deposited payroll money for 2006 as required.

    He wants me to help him negotiate with IRS. Is there any tips? I am licensed CPA and want to grow in this area (representation).


    Prepare & file the 941s to get him up to date, paying the money owed. Deal with the penalties when he hears from theIRS. IRS won't even talk to you until he is in compliance and it's always better to get them filed before theIRS starts sending the letters out.
    "A man that holds a cat by the tail learns something he can learn no other way." - Mark Twain


      Step by Step...

      First, Get Form 2848 POA on both years, and be sure and include the Form 940 also.

      Second, agree with the above. File the returns.

      Third, while waiting on the IRS penalty notices. Read the IRS penalty manual related to reasonable cause. It's on the IRS web page.

      Some things to be aware of:

      Interest cannot be abated.

      There is a almost automatic one time penalty abatement for a quarter, if the taxpayer has not already used this free pass, use carefully.

      Review deposits, you may be able to reapply to different periods to reduce penalties. Example: rather than a late 3rd quarter, apply to 4th quarter to create timely deposit. Use free pass on third quarter.

      Don't forget to check on your state payroll situation.

      IRS is much easier to deal with if the tax deposits are caught up and all current returns are filed.