Many small business (SMB) owners are forced to delegate duties and responsibilities to others as there are simply not enough hours in any given day to “do it all.” Delegation frees up more time to focus on strategic hands-on work, instead of worrying about small details. While effective, business owners must be cautious when delegating responsibilities relative to tax issues. It is not uncommon for a business owner to rely on a CPA to prepare tax returns, or a bookkeeper or payroll service to handle income statements and payroll tax deposits. Ultimately, however, a business owner must maintain accountability despite the fact that someone else is “handling” the taxes.

The issue of accountability becomes paramount when dealing with tax liabilities in general, but particularly when that liability stems from unpaid withholding taxes. While it is clear that the IRS will attempt to collect unpaid withholding taxes from a business, many owners are surprised to learn that the IRS can also make assessments against willful and responsible parties under the provisions covering the Trust Fund Recovery Penalty. Regardless of whether or not a business owner is delegating the federal tax deposit responsibilities to others, in most cases the IRS will still find the owner responsible on a personal level.

Anyone that has dealt with IRS Collections has probably received numerous letters and notices regarding their liability. In fact, I would go so far as to say that IRS Collections can inundate taxpayers with notices over time. While no one wants to receive a letter from the IRS, it is imperative that business owners pay attention to each notice.  Often times these notices will include requests for a response or additional information, and may contain important deadlines. Failure to respond to a notice could result in audit, additional tax, interest and penalty assessment, or levies, garnishments and possibly seizure.

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When it comes to tax issues, business owners must take an active role in reviewing tax returns, federal tax deposits, and notices on a consistent and on-going basis. Paying attention to the details may make the difference between working out a reasonable resolution or facing an insurmountable obstacle. When in doubt, it is essential to seek professional help. Contact us today, and we can help to answer any questions while simultaneously getting you and your business back on track.

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If at first you don’t succeed… A taxpayer that is seeking an abatement on penalties will initially have to make the request through the Collections Division or other functions within the IRS.  When unsuccessful at this level, it would be wise to escalate the request to the IRS Appeals Division. Appeals is independent from the Collections Division and is tasked with resolving disputes on a fair and impartial basis without litigation.

The Treasury Inspector General for Tax Administration (TIGTA) recently conducted an audit to evaluate whether penalties assessed against taxpayers were fully or partially abated in accordance with Appeals criteria.  On July 30, 2015 TIGTA issued a statement on its findings, noting that Appeals has the authority to abate certain penalties when the abatement request has been denied by another function within the IRS.  Furthermore, the statement pointed out that in Fiscal Year 2013, Appeals abated approximately $127 million in penalties.

Generally, the audit found that in most cases, Appeals properly accepted cases in which the IRS operating division had previously denied the taxpayer’s request for abatement.  There were, however, a number of penalty appeals cases that were not abated in accordance with Appeals criteria.  TIGTA noted that in some cases, they could not determine the justification that Appeals personnel used in granting the penalty abatement. Additionally, the Treasury also determined that a small number of processing errors and control weaknesses might have affected the outcome of penalty abatement decisions at the Appeals level.

While the audit went on to conclude that additional training was necessary for Appeals Technical Employees on the requirements for justifying, documenting and granting abatement on penalties, it nonetheless illustrated the point that Appeals is an effective venue for a second chance at abatement of penalties.

We understand that appeals can play an important role in obtaining a desirable resolution. Click here to learn more about how we assist you with your unique situation.

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