IRS Corrects Erroneous HIRE Act Deposit Penalty Notices

The IRS has corrected an error it made in applying the first quarter 2010 HIRE Act credit to the second quarter 2010 Form 941, Employer's Quarterly Federal Tax Return [IRS Issue Management Resolution System (IMRS) 10-0001357, Erroneous CP 276B].

The Hiring Incentives to Restore Employment Act (HIRE Act, P.L. 111-147) credit allowed certain employers to forego payment of their share of the Social Security taxes (6.2% tax rate) on wages paid from March 19, 2010 to Dec. 31, 2010 to new hires who met certain requirements). The HIRE Act credit for the March 19 to March 31, 2010 period could not be claimed on Form 941 until the second quarter 2010 return. The credit for the March period was claimed on line 12e of Form 941. The mistake made by the IRS caused it to send out erroneous CP 207 and CP 276B notices to some taxpayers. The IRS has corrected the error and reversed all erroneous failure to deposit (FTD) penalty assessments that it made on employers. Any employer that was erroneously assessed penalties will still be eligible for a future abatement of the penalty if it is the first time that the employer was assessed the penalty.

Observation: The IRS sends out a CP 207 notice if it proposes a federal tax deposit penalty. A CP 276B notice asks taxpayers to review their records to determine if they are paying their current payroll taxes on time.