Payroll Taxes

[ILLMAS]

I have a new NP client and they fell behind on paying their payroll taxes on time, they are up to date now, but now they started receiving notices for penalties and interest. From what I am seeing, the NP always had money to cover payroll taxes on time, the new executive director just doesn't know why they were not paid. I regret telling the client that I would talk to the IRS or prepare a letter asking them to forgive either the penalty or interest, becuase now I am seeing they always had money. I have worked with other NP that when they don't have money, they don't pay their employees until some funding comes in and this wasn't the case with this NP. I would like for the NP client to see that I saved them some money, but another part of me is just saying pay it and don't make the same mistake again. What your thought?

By the way, I like the new design of the site, great work!!

[JohnH]

I think this helps because you have another good argument to offer (in addition to your other arguments). If there were times when they didn't have the money, then you're basically acknowledging that they illegally spent the trust fund money. If they always had the money on hand but failed to send it in due to an unintentional oversight, then you would add to your letter a comment to the effect that you can show that the money was in the bank available to pay the taxes, thus demonstrating there was no effort or intent to divert trust fund taxes for unauthorized purposes. It should actually help in your effort to get any penalties abated based on compassionate reasons.

BTW, I think you should forget the interest because it's statutory. I'd just go ahead and pay it while concentrating on getting the penalties abated.

[imjulier]

It is worth a call to the IRS at least. I've heard of them cutting bills in half for NPs. Also, I had a client that didn't pay on time and they dropped both penalties and interest for one period (quarter)just on our phone call. They indicated that there would be no relief for other periods without reasonable cause explained in a written letter so you may want to prepare the executive director for other notices to expect by understanding how many periods were paid late. Your notice probably applies to only one period. Good luck.

[jainen]

>>they are up to date now<<

When you don't actually have reasonable cause, abject apology can be surprisingly effective. The key supporting arguments are a)they had a really good record of paying ALL taxes on time, b)this was an isolated problem that arose during an unusual time of transition, c)they did not benefit from the non-payment or pay other bills instead, d)they have made SPECIFIC changes in their procedures to ensure it won't ever happen again, e)they have a really good record of timely payments under their new procedures so far. In such a context, the IRS will agree the penalty has already served its purpose in ensuring compliance.

[ILLMAS]

>>they are up to date now<<

When you don't actually have reasonable cause, abject apology can be surprisingly effective. The key supporting arguments are a)they had a really good record of paying ALL taxes on time, b)this was an isolated problem that arose during an unusual time of transition, c)they did not benefit from the non-payment or pay other bills instead, d)they have made SPECIFIC changes in their procedures to ensure it won't ever happen again, e)they have a really good record of timely payments under their new procedures so far. In such a context, the IRS will agree the penalty has already served its purpose in ensuring compliance.

Jainen, thank you so much, this is great info that I will probably use for the letter.

MAS