Discussion:941 Deposit Requirements
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Discussion Forum Index --> Tax Questions --> 941 Deposit Requirements
Actionbsns (talk|edits) said: | 27 November 2007 |
| Every December IRS sends out notices to companies indicating what the deposit requirements will be for the coming year. I have a client who has a payroll level that would have required a change from monthly to the every two week method of deposits and I was anticipating them getting such a letter last year, BUT, they were a new company in 2006, and no letter was received. Now they have received a letter from IRS assessing penalties on the second quarter of 2007 for not following the proper deposit requirements. We responded with pretty much the comment above adking for the abatement of penalties and interest.
My question pertains more to Circular 15 and the letter from IRS regarding deposit requirements. It appears that a case can be made requiring the taxpayer to monitor their own deposit requirements, and the instructions to determine if that change applies are provided. However, since IRS has set the precedent of informing taxpayers by mail, it seems a case can be made for "no letter, no change that I, as a taxpayer, am aware of". Any thoughts on this issue? What have been the experiences of others? We are expecting to get a letter for the third quarter as well, but it's weird that we have heard nothing on the first quarter. BTW, I don't prepare this payroll, they have a service, I do other things for them and will prepare their corporate return this year. | |
| 27 November 2007 | |
| Several times over the years I have run into this and sent the IRS a "Please forgive me I am so stupid" letter, and they each time forgave the penalties, don't remember if the interest was forgiven, but I doubt it. I know I should monitor this for my accounting clients, but I still don't do it!
If they have a 3rd party payroll processor, seems to me the processor should have handled the IRS communications and any penalties/interest. I would contact them and see what they say. | |
| 27 November 2007 | |
| Often times, the letters are sent to the clients, who don't seem to forward them to their accountants. I agree with RJM that IRS will usually forgive those penalties if you write them a letter and correct the deposit method going forward. It also seems that the IRS does not always mail those letters. But they take the position that "ignorance is no excuse" Generally, though, They will accept a "please forgive me " letter. Hope this helps | |
| 27 November 2007 | |
| I'm surprised that the payroll service doesn't monitor the deposit requirements. It's a very easy mathematical calculation, once you have the data in the system. Do they have any sort of penalty guarantee? | |
Johnhuddleston (talk|edits) said: | 27 November 2007 |
| I agree that the IRS will likely forgive the penalty. They forgave the penalty when I expected total payroll to be under $2500 and it was not.
John Huddleston [Seattle Bellevue Tax Accountant] | |
| 27 November 2007 | |
| ...has a payroll level that would have required a change from monthly to the every two week method of deposits...
That may have just been a miswording, but the deposit schedule would go from monthly to semi-weekly. If deposits are made every 2 weeks the payments will still be late. | |
Actionbsns (talk|edits) said: | 27 November 2007 |
| Taxref, yes, it's just a matter of semantics. The client's payroll has moved to the next level or the semi-weekly level, to be deposited within 3 days. I'm hoping my letter will suffice, they really don't need more grief this year - this is the same guy who, in another post, I mentioned the roofing incident with his pest control crew. (Crew went on a roof to tent for termites and caused $135,000 damage to the roof - discussions are ongoing on that incident). They just don't need any more unnecessary attachments to their income. | |
| 27 November 2007 | |
| It's my understanding that the IRS no longer sends out these 'annual' letters and that it is the TP responsibility to monitor their deposit requirements. I haven't seen one in years. Have any of you gotten one recently? | |
Actionbsns (talk|edits) said: | 1 December 2007 |
| LJA - I got one just last year when IRS sent a letter telling me that since my payroll is so small, I am not required to deposit monthly even. And I have seen several for my payroll clients, they bring them in not knowing what to do about it. With this particular client, we were actually watching for that letter. I'll keep an eye out for the letters this year and let you know if anyone gets them. You've peeked my interest on the issue now. BTW, the payroll preparer has admitted to be lax on checking this, it's going to be interesting to see if they absorb the penalty. One of the employees made a comment to the affect that there are several clients receiving the same penalty assements. It's been a lesson learned, because I've always relied on the IRS letter to tell us things have changed, although I know the rules are clearly written in Circular 15. | |
Bottom Line (talk|edits) said: | 1 December 2007 |
| For my clients that got converted to a 944 "to make it easier for the taxpayer" (HA!), I still have them make deposits at least quarterly. I hate the idea of them having to come up with a large (for them) amount of money at the end of the year right after Christmas. | |
| 1 December 2007 | |
| I always try to get my clients to deposit the payroll taxes with each payroll. Getting into this habit prevents the oooops I forgot to deposit situation. | |
| 2 December 2007 | |
| And what's with "semi-weekly", what a misnomer. It should say "the third business day", or "weekly".. 'Ya know what grinds my gears?' - Peter Griffin
OK, I'm on a rant.... | |
Actionbsns (talk|edits) said: | 2 December 2007 |
| G - the "semi-weekly" thing got me into a bit of trouble several years ago. I interepreted it to mean every two weeks and had only one client then who needed to do this. We faithfully did deposits every two weeks for a long time, like a couple of years, before IRS followed up on it. Then they penalized the client for a couple of quarters I think. I called to complain, they said that semi weekly actually means twice a week, and had no sympathy for us at all. I was just about to say "But we've been doing this for a couple years now and you never said anything" when I bit my tongue and SHUT UP!!! They never went back past the periods they were penalizing, I picked up the penalties, and we started depositing every payroll. Later I was in a discussion with a lawyer about something different and he was having trouble with semi weekly as opposed to bi weekly as well, I felt a little less stupid after that. If the word guy didn't get it what chance does the poor number's guy have. I so agree though that they should re-name it to weekly or every payroll or something that has a lot less room for misinterpretation. | |
| 2 December 2007 | |
| Now that you mention it, semi-weekly IS twice a week! I'm backwards. Bi-weekly is when you like both kinds of weeks - LOL................. | |
| 2 December 2007 | |
| LGA- IRS is still sending out the notices.
I had one of my clients get one about a month ago. In this particular case, client started out by being semi-weekly. Since she cut down on payroll the last two years, IRS has notified her of being monthly. However, since her payroll is quite erratic and irregular and never know when she might go over the threshhold for semi-weekly, regardless of the IRS notice, I still have the client pay semi-weekly - whenever she does have a payroll. | |
