Wage Garnishment - Statutory Addition

[geekgirldany]

Client & his employer received a Form 668-W(c) notice of levy on wages. Maybe I just don't remember or just never noticed but there is a column called Statutory Additions. From some research I have done on the net it looks like this is Penalty and interest charges that continue to accrue until you pay the total amount in full.

Now Unpaid Balance column is $10,000... Statutory Additions is $700.
My question: is the statutory additions - penalty and interest for a given time frame? Say like for one month?

My client is under the impression that the $700 is for the whole time period the amount/return has been past due, which is from 2006 to present. I told him I highly doubt it.
I've done an estimate on how much he owed for that year and put it through my penalty and interest calculator... I am coming close to the $10,000 the IRS is showing and that amount includes interest and penalties.


Just want to make I fully understand how the statutory addition amount is calculated before I talk in more detail to the client.

Thank you
D

[Snaggletooth]

Doesn't Add Up

"Statutory" implies these additions are required to be tacked on by law. This is opposed to a myriad of penalties which can be subjective on the part of the IRS and not required by law.

Interest on unpaid taxes is statutory, meaning the IRS is not allowed to cancel it. (Or at least they would have us believe this).

But six years' interest on $10,000??? No way. This should be in the neighborhood of $3000.

There is one scenario, however, where this could be correct. Let's say the taxpayer has been assessed $10,000 and $3000 interest. Assume also that he has managed to pay $2300, and the IRS has elected to apply ALL of his payment to interest. That would leave $700 as a so-called "Statutory addition."

Danyelle - this is just off the top of my head (like scum off a dirty pond). I'm sure there are people who know more about this, but I responded because no one else has done so.

[geekgirldany]

Thanks Snag for responding.

After doing the tax return tonight I am showing he will owe around $6,000 (rounded). When I put this into my tax penalty and interest calculator I am getting about $4,000 in penalties/interest.

I am pretty sure what the IRS is showing on the Garnishment is correct (as I am close) but like I said I have just never noticed the Statutory Additions column before. The client believes after the tax return is filed he will only owe the balance originally owed plus the statutory additions shown on the levy. I think he is just trying to make a bad situation try to come out better.