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Leslie Bonacum
Neil Allen

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 Problems

(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,, 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 CCH.

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 company’s 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 situations.

However, with direction from the taxpayer using payroll, 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 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 user’s 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.


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

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