If you receive a payment due notice from the Internal Revenue Service (IRS), it could be an error.
The National Association of Tax Professionals (NATP) explains that the IRS mistakenly sent out CP161 notices earlier this year to some taxpayers who did not have a balance due with the IRS. The notice is a Requests for Payment or Notice of Unpaid Balance. According to NBC News and the NATP, the mistaken notices were triggered by a change in programming made by the IRS. Although the agency was notified of the error, and after an apparent fix was rolled out in July, some people have been getting notices of payment due, when nothing is due.
In responding to NBC News, the IRS said, “A small percentage of certain businesses have received notices (primarily notice CP161) indicating an erroneous increase to their penalty for not paying estimated tax.” That said, the IRS has not issued guidance on the particulars of the problem. There are several forms impacted by the glitch, including:
- Form 1120/Form 1041: Taxpayers who calculated their estimated tax penalty using two methods could receive a notice in error. The two methods are calculating an annual payment based on the prior tax year and figuring an estimated tax penalty with the annualized income installment calculation.
- Form 8804: There could be issues with taxpayers who are reporting partnership withholding tax.
- Form 990: Taxpayers with excise tax owing on net investment income and those reporting unrelated business tax could see an error notice. NBC News notes these are often nonprofits that have excise tax liability or federal income.
What is being done?
Although the IRS has provided no standard guidance it responded to the NATP that its IT groups are working to resolve the problem. IRS customer service personnel have been alerted to questions from taxpayers or tax professionals and the agency says affected accounts will be corrected approximately 30 days from the date of the balance due error notice.
So, what should you do you do?
Your tax attorney can best field your questions if you receive a notice. Tax professionals can also reach out directly to their local IRS stakeholder liaison for support.
In theory, the IRS is self-correcting the problem, but be sure you or your accountant reviews your IRS account going forward to ensure the correction is made.
As we frequently say, do not throw that IRS notice away. Keep documents you receive and notes of any calls to the IRS and turn them over to your tax professional if needed. A balance due notice is never pleasant to receive but in this particular case, there might be nothing to worry about.
Knowledgeable legal help is a phone call away
Notices from the IRS can be unsettling whether it is a mistaken notice or information about an upcoming IRS audit. The legal group at Robert J. Fedor, Esq., L.L.C., delivers the guidance needed to keep your tax returns, payroll tax problems and offshore assets off the radar of the IRS. Speak with our knowledgeable tax attorneys today at 440-250-9709. We serve clients across the U.S. and internationally from our offices in Cleveland and Chicago.
If you would like answers for basic questions about tax penalties, tardy filing of returns, or different forms of tax fraud, download our free e-book, Since You Asked: 15 Common and Concerning Tax Law Questions and Answers.
