MSATP Comments on AICPA Letter to IRS 

MSATP supports the AICPA’s letter asking the IRS to push back the Sept 30 filing deadline for taxpayers to receive penalty relief under of IRS Notice 2022-36. The notice was issued August 24 and provides automatic relief from failure to file penalties for certain 2019 and 2020 returns filed by September 30, 2022.

In the letter, the AICPA states:

“We are pleased that IRS has provided some measure of COVID-19 related penalty relief for taxpayers. We applaud the unprecedented waiver of the failure to file penalty under section 6651(a)(1).1 And we praise the IRS for waiving the various international information reporting penalties under sections 6038, 6038A, 6038C, 6039F and 6677 in certain cases. Under the Notice, these penalties will be waived if the returns are filed on or before September 30, 2022. As the AICPA has requested and pointed out in various letters to IRS and Congress and through our multiyear dialogue with IRS on Form 3520 penalties, the penalty relief provided will save the Treasury and the IRS resources by prompting voluntary compliance. Additionally, significant taxpayer burden will be reduced by automatically waiving the penalties covered by Notice 2022-36 and automatically providing refunds where penalties have already been paid.

“We request that the deadline of September 30, 2022 be extended to December 31, 2022. The business cycle of the tax profession is filled with upcoming deadlines (September 15 deadline for pass-throughs, September 30 for trusts, and October 15 for individuals and corporations), and inserting a September 30 deadline into this mix creates an insurmountable burden for most practitioners and taxpayers. Additionally, given the complex facts often associated with international information reporting and that many affected taxpayers live abroad, the September 30 deadline is unrealistic and will fail to prompt a critical mass of impacted taxpayers to avail themselves of the benefits of the Notice. Extending the deadline will assist the practitioner community in maximizing the relief provided and will bring more taxpayers into voluntary compliance. In turn, such voluntary compliance will save the IRS resources.

“We also note that the Notice provides relief for ‘specified tax returns for taxable years 2019 and 2020 that are filed on or before September 30, 2022.’ We urge clarification to make explicit that the rules under section 7502 apply to determine whether returns are filed timely under this Notice.”

Outsourcing Payroll Duties Can Be a Sound Business Practice, but… Know Your Tax Responsibilities as an Employer | IRS Small Business

Many employers outsource some or all their payroll and related tax duties to third-party payroll service providers. Third-party payroll service providers can greatly streamline business operations as well as help assure filing deadlines and deposit requirements are met. Some of the services they provide are:

• Administering payroll and employment taxes on behalf of the employer where the employer provides the funds initially to the third-party.
• Reporting, collecting and depositing employment taxes with state and federal authorities.

Employers who outsource some or all their payroll responsibilities should consider the following:

• The employer is ultimately responsible for the deposit and payment of federal tax liabilities. Even though the employer may forward the tax amounts to the third-party to make the tax deposits, the employer is the responsible party. If the third-party fails to make the federal tax payments, then IRS may assess penalties and interest on the employer’s account. The employer is liable for all taxes, penalties and interest due. The employer may also be held personally liable for certain unpaid federal taxes.
• If there are any issues with an account, then the IRS will send correspondence to the employer at the address of record. The IRS strongly suggests that the employer does not change their address of record to that of the payroll service provider as it may significantly limit the employer’s ability to be informed of tax matters involving their business.
• Electronic Funds Transfer (EFT) must be used to deposit all federal tax deposits. Generally, an EFT is made using Electronic Federal Tax Payment System (EFTPS). Employers should ensure their payroll providers are using EFTPS, so the employers can confirm that payments are being made on their behalf. Employers should register on the EFTPS system to get their own PIN and use this PIN to periodically verify payments. A red flag should go up the first time a service provider misses a payment or makes a late payment. When an employer registers on EFTPS they will have on-line access to their payment history for 16 months. In addition, EFTPS allows employers to make any additional tax payments that their third-party provider is not making on their behalf such as estimated tax payments.

EFTPS is secure, accurate, easy to use and provides an immediate confirmation for each transaction. The service is offered free of charge from the U.S. Department of Treasury and enables employers to make and verify federal tax payments electronically 24 hours a day, 7 days a week through the internet or by phone. For more information, employers can enroll online at EFTPS.gov or call EFTPS Customer Service at 800-555-4477 for an enrollment form or speak with a customer service agent.

There have been prosecutions of individuals and companies, who acting under the guise of a payroll service provider, have stolen funds intended for payment of employment taxes.

Remember, employers are ultimately the parties responsible for the payment of income tax withheld and both the employer and employee portions of social security and Medicare taxes.

Employers who believe that a bill or notice received is a result of a problem with their payroll service provider should contact the IRS as soon as possible by calling the number on the bill, writing to the IRS office that sent the bill, calling 800-829-4933 or visiting a local IRS office. For more information about IRS notices, bills and payment options, refer to Publication 594, The IRS Collection Process.