Discussion:941 Tax deposit rules
From TaxAlmanac
Discussion Forum Index --> Tax Questions --> 941 Tax deposit rules
| 12 July 2006 | |
| I'd like to know whether the taxpayer is responsible to determine that he's a semi-weekly depositer. IRS ususally send out notices by year end and telling the taxpayers if they're monthly or semi-weekly depositers. I have a client who does his own payroll in-house. He was a semi-weekly depositer for 2005 but he made monthly deposits for that year and he got assessed penalties for late payment of deposits. He says that he never got a notice from IRS in this regard and thus he's not responsible for the penalty.
Please let me know if he's responsible and what alternatives are available to abate the penalties. That you so much for your help. | |
| 12 July 2006 | |
| I've just added an overview page for Publication 15 which includes links to the publication on the IRS website. You can view all other such publication pages by selecting Forms & Pubs from the menu on the Main Page.
| |
Janakpatel (talk|edits) said: | 14 July 2006 |
| IRS usually sends out notices for deposit schedule changes. If your notice went to the wrong address, you can write a letter with valid proof and ask for waiver of penalty and intrest. It worked for me. | |
Vermontcpa (talk|edits) said: | 1 September 2009 |
| Turkey one owner S-corp client decides they can do 941 and payments all by themselves and avoid my fees. Only taxpayer paid 3 months of liability for Q2 2009 for months apr, may, and jun on 7/17/09 and NOT by the 5/15, 6/15 and 7/15 as they should have been paid. Client now wants help to get penalty abated.
The only employee is the single owner of the s-corp. I believe we could do an amended 941 and move to q3 to avoid issue. What other remedies would be available in this scenario? Turkey to be billed... | |
Actionbsns (talk|edits) said: | 1 September 2009 |
| I don't think I'd amend and put all that payroll into another quarter. If you put it all in Quarter 3, said all payroll was paid on July 1, the taxes aren't due til August 15. I think there's too much tap dancing. And how would you phrase your reasons to amend. Unfortunately, sometimes a client has to learn the hard way that your fees aren't that bad compared to a penalty. Once it's out there on the table like this, with payroll periods identified as Apr May and June, it's hard to go back and change that. | |
Vermontcpa (talk|edits) said: | 1 September 2009 |
| I hear ya on the tap dancing. Outside of amending the 941, is there any avenue/chance for abatement of penalty on this due to taxpayer ignorance or other related reason? | |
Actionbsns (talk|edits) said: | 1 September 2009 |
| Taxpayer ignorance will not get you far with the IRS. I have a client who does wacky things with her payroll because she so dearly wants everything to be black and white in her books, i.e. everything must fit within the month from the first to the last day. You might have to see it to understand that, but anyway, what happens is that often her deposit for the last pay period of the month is a couple of days late and she gets a penalty. I've explained it and explained it to her, but she keeps doing what she does. I can't successfully argue for removal of the penalty for her, and she has tried a couple of times. Each time it falls on deaf ears. How big is the penalty compared to your fee? My best suggestion is to tell the client it's a learning experience and you will be cheaper in the future. | |
Vermontcpa (talk|edits) said: | 1 September 2009 |
| Penalty is approximately $810 and I would have charged $250 for Quarterly payroll tax forms and guidance on amounts for single member s-corp. | |
Mikex2e7n5 (talk|edits) said: | 1 September 2009 |
| I tell my people that the best and simplest way is to make the deposit on the day of payroll. Then no problems | |
| 1 September 2009 | |
| I have my monthly depositors make payroll tax deposited with the last payroll of the month. Two weeks early is better than dealing with the penalties. | |
| September 1, 2009 | |
| IRS has been pretty good about waiving these for first time penalties. | |
Seaside CPA (talk|edits) said: | 1 September 2009 |
| Agree with JR1. If this is first penalty, a letter begging forgiveness & stating that things will be handled appropriately going forward may get penalty waived. | |
| 1 September 2009 | |
| I've often hesitated about some new clients where you write the letter under POA in order to get the penalty waived, and state that client will do everything correctly in the future... and then you never see them again and you KNOW that they probably are NOT doing things correctly.... does that sully your own reputation with the IRS about your assurances regarding deadbeat TP? | |
Seaside CPA (talk|edits) said: | 2 September 2009 |
| I don't write the letter under a POA. I word the letter for client & get them to sign it. It will usually state that they now have obtained the services of a CPA & are now aware of the depository requirements, & that they will make deposits in a timely manner going forward. They sign it. | |
| 3 September 2009 | |
| I recently had a client come back to me from another preparer who didn't advise them about their new semi-weekly deposit status. They did not get the IRS notice regarding the change either. I used one of those online services which re-allocates the tax deposits made. I sent in a waiver letter, but included the report issued by this service (which cut their $900+ penalty almost in half). At the bottom of the waiver request, I state that if the IRS won't waive the penalty, then reduce the penalty based on the attached.
I have had recent success with waivers this way. I'm not sure if the lower penalty amount impacts the waiver decision or not. However, since the service takes so long to process any correspondence, this resolves the matter quicker. The penalty is either reduced or waived. | |
Actionbsns (talk|edits) said: | 3 September 2009 |
| I've never heard of an online service that can re-allocate tax deposits. How does that work and how do you connect with them?
Just for information, IRS does not necessarily send out letters anymore indicating a change in deposit requirements. I had a client who got caught when his requirements changed, I didn't prepare their payroll and the company who did, didn't catch that they needed to follow new rules. Other issues were involved that brought in the local Revenue Officer, he chastised the client and when we argued that the letter was never received, it was pointed out that that was irrelevant and the taxpayer is obligated to follow the guidelines in Publication 15 even without the letter. Frankly, I was really glad I wasn't responsible for their payroll, because until the RO put in those terms, I was expecting a letter and would continue to expect one. My office pays a great deal of attention to this now. | |
| 3 September 2009 | |
| This has been a great resource for my practice. My clients are appreciative that I am able to reduce their penalty (if not waived or if no reasonable cause). There is a flat subscription fee of $149 per year, but I've been able to bill much more than that. You can check it out at payrollpenalty dot com. I am not affiliated with this product and get nothing from posting it here, other than to alert others.
It is easy to use. You put in the tax deposits and liabilities by date. It will produce a report which you send in to the IRS to reduce the penalty. This is allowed by RRA 98 Section 3304(a). A letter based on "I didn't know" will not work to waive the penalty. | |
Actionbsns (talk|edits) said: | 3 September 2009 |
| Seems to me that I could use the annual fee better in my own wallet, write my own letter following the prescribed rules and still serve my client well. I think most of us strive to keep our clients as penalty free as we can. You would have to have a lot of clients with penalties to make a service like this pay off. | |
