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Hundreds Of Thousands Of Taxpayers May Have Been Charged Inflated
Penalties For Missing Payroll Filings Easy, New Internet Tool From Cch Helps Users Reduce Penalties, Cascading
(RIVERWOODS, ILL., November 5, 1999) A little known change in the federal tax
law recently could mean hundreds of thousands of taxpayers are paying inflated penalties
for missed payroll filings, according to CCH INCORPORATED (CCH), a leading provider of tax
and payroll law information and software. Many corporations, small business owners, self
employed individuals, tax professionals and payroll professionals seemed to have missed a
recent law change that allows them 90 days to ask the IRS to use a different calculation
method, enabling them to designate how their payments should be applied. The IRS notified
more than 500,000 taxpayers in July that it had omitted the new information in previous
deposit penalty notices.
CCH is helping taxpayers determine if their assessed penalties are too high with an
easy to use Internet tool, payrollpenalty.com, developed by TimeValue Software. The
service enables taxpayers to apply the latest IRS-sanctioned methods to test a variety of
alternative computation methods and prevent companies from paying more than necessary on
their payroll deposit deficiencies. The IRS issues to businesses nearly 3.5 million
payroll penalty notices each year.
"To date, over 80 percent of the those who have used the service have saved a
significant amount of money, with an average penalty reduction of 40 percent," said
Catherine Wolfe, sales and marketing director for the CCH federal and state tax group.
"CCH wants its customers to have access to what we believe is an excellent way to
avoid unnecessary penalties."
One Deficiency Leads to Another
Unfortunately, being late with a single payment and being assessed a penalty is often
just the beginning of a series of deficiencies and further penalties, because of the way
that the IRS applies payments in the absence of guidance from the taxpayer, according to
For example, a company may have missed a payroll tax deposit on January 15, but then
makes timely deposits on February 15 and March 15. The Service would apply the February 15
deposit to cover the January 15 liability, which then creates a liability for February.
The companys March 15 deposit is then applied to the February liability, creating a
March liability in turn. Instead of a single penalty, the company is socked with three
penalties, with more to come. And this is one of the simplest possible payroll deposit
scenarios in actual practice, many companies find themselves in much more confusing
However, with direction from the taxpayer using payroll penalty.com, that cascading
series of penalties may be turned into a single penalty, significantly reducing the amount
owed to the IRS.
Reform Legislation, Software, Provide Relief
Under the IRS reform legislation of 1998, taxpayers are allowed to break the cycle of
cascading deficiencies by designating how payments are to be allocated, if they act within
90 days of receiving a deficiency notice. But according to Jeff Kessler, marketing
director, CCH Health and Human Resources group, this is easier said than done.
"The problem is, evaluating all the allocation options can be time-consuming and
complex, especially if the company has to use multiple deposit schedules."
With payrollpenalty.com the software model allows users to enter their liabilities and
deposits, then test a series of allocation methods. The calculations and an extensive
email report are free if the users savings are calculated to be less than $500. If
the users savings are calculated to be higher than $500, the fee for the service and
reports can be as little as $49.
About CCH INCORPORATED
CCH INCORPORATED, headquartered in Riverwoods, Ill., was founded in 1913 and has
served four generations of business professionals and their clients. The company produces
more than 700 electronic and print products for the tax, legal, securities, human
resources, health care and small business markets. CCH is a wholly owned subsidiary of
Wolters Kluwer U.S. The CCH web site can be accessed at www.cch.com.
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