IRS Notices for Second Quarter 2020

At A Glance

• Some employers have reported receiving letters from IRS proposing a Federal Tax Deposit wasn’t submitted correctly
• Penalty Preliminary reports suggest these letters are being sent only to employers who reduced deposits in anticipation of FFCRA and/or CARES Credits
• Based on preliminary findings, it appears the problem relates to how IRS is processing the deposits reported for FFCRA and CARES on the Q2 941
• Paylocity Government Relations has been in contact with IRS who is actively investigating the issue
• We are in the process of determining through IRS guidance whether a response is required to these notices and will provide updates once the investigation is complete

Details

IRS recently issued computer generated notices CP276B that pertains to the assessment of a Federal Tax Deposit penalty for making inaccurate deposits.

According to IRS, employers who reduce their Federal Employment Tax Deposits in anticipation of receiving FFCRA or CARES credits, will not be subject to a Federal Tax Deposit Penalty for these reduced deposits.  Based on IRS guidance, the penalty calculation is prevented by the posting of a transaction code for any FFCRA or CARES credits posted on the form 941.

We have thoroughly reviewed our tax filing process and our reporting for these associated credits and have found that we are in line with the IRS reporting requirements as stated above.  Based on these preliminary findings, we are confident the IRS will correct the issue without requiring correspondence to dispute the penalties.  

Next Steps

Our Government Relations Team has been working with the IRS to determine what additional steps will be required if any to address this issue.  In the interim, we ask that you refrain from sending these notices until further notice.