Remove IRS interest and penalties

[jamessite]

I efiled my client's return in February. He paid the IRS and mailed it in on April 15. It was a Cashier's check. The IRS did not cash it until May 8. They are hitting him with interest and penalties. In his mind, since it was a Cashier's check, then the bank had already taken the money out of his account. He wrote the IRS a letter explaining the above. He has no proof of the date he mailed the check to the IRS. I explained that without proof of date of  mailing, the IRS would most likely deny his request to remove interest and penalties. Does anyone have any suggestions or ideas that might help my client?

[abctax55]

How much is the interest and penalty for the 23 days?

[jamessite]

He owed about $81000 but NO 2210 penalty. He was charged about $850 in interest and penalties

[IRonMaN]

He got the cashier's check and sat on it a while before he mailed it?  Otherwise wouldn't the date it cleared the bank be roughly when he mailed it?  Are you sure he didn't sit on it and mail it after April 15th?

[abctax55]

Without proof of mailing.... there's not much to fight with.  I think I've seen some postings on other list-serves that the IRS is using the arrival date instead of the postmark date.  BUT you don't have a postmark date for a sword.

And for that amount, which indicates substantial income.... a cashiers check???  Paying on-line is advisable, but if not - then using certified mail is.    I know, I know... too late for that advise.

Generally, I've found the IRS will accept the handwritten date on a payment check especially around deadline time as they often don't get around to processing all the mail that arrives that day.

[Just-Lisa-Now-]

He mailed a cashiers check for 81k?   Im surprised they cashed it at all, shouldn't an amount that high only be paid electronically?

[IRonMaN]

I think that check is a tad under the limit:

Notice to Taxpayers Presenting Checks:

When you provide a check as payment, you authorize us either to use information from your check to make a one-time electronic fund transfer from your account or to process the payment as a check transaction. When we use information from your check to make an electronic fund transfer, funds may be withdrawn from your account as soon as the same day we receive your payment, and you will not receive your check back from your financial institution.

Larger payments

We can't accept single check or money order amounts of $100 million or more. You can submit multiple payments or make a same-day wire payment.

[PATAX]

@Just-Lisa-Now- I believe you can mail a check for that amount. But the client should have mailed it via certified mail with the stamped receipt at the post office.

[IRonMaN]

I put my thinking cap on and I'm pretty confident that is under the $100 million limit

[Just-Lisa-Now-]

OK, its just CA that has limits then

Mandatory Electronic Payments – You are required to remit all your payments electronically once you make an estimate or extension payment exceeding $20,000 or you file an original tax return with a total tax liability over $80,000.

[abctax55]

I wasn't even thinking of the limits issue.....

With numbers that big, I want documentation such as 'proof the check' cleared my account.  Or better yet, the proof from paying on-line.  

Best of all is that proof of mailing; especially for such a large amount.

But then I'm old & paranoid <w>

[PATAX]

@Just-Lisa-Now- @jamessite @abctax55 @IRonMaN Pennsylvania individual payments of more than $15,000 must apparently be electronically paid.

[sjrcpa]

I think VA's threshold is $5,000.

[TaxGuyBill]

I think the IRS scans all envelopes that they receive.  That means if there was a postmark on the envelope, the IRS should have a scan of it buried in their computer somewhere.

He can try calling the IRS to find someone who is willing to look up that scan, but my guess is that it won't be easy to find somebody that is willing and able to do it.  It sounds like about $900 of work to get rid of $850 of penalties and interest.

[PATAX]

Apparently if the amount is over $15, 000 and you do not electronically pay it as they want you to, then apparently there is a 3% penalty. But the maximum penalty is "only" $500, isn't that nice of them?

[rbynaker]

---

@TaxGuyBill wrote:

I think the IRS scans all envelopes that they receive.  That means if there was a postmark on the envelope, the IRS should have a scan of it buried in their computer somewhere.

That's my understanding as well.  But the IRS' "go to" response seems to always be "send in proof of mailing."  Which then inevitably gets lost and has to be sent again a couple more times and eventually escalated to TAS.

Since you don't have proof of mailing I would say this is an expensive lesson for the taxpayer to next time either pay electronically or pay the upcharge for certified mail.  Sometimes reaching out to a representative in Congress can get things moving (but again without proof of mailing . . .)

I have seen reports on other lists about S Corp extensions (paper filed) getting posted with the "received" date instead of the "postmarked" date.  That seems to be a systemic problem that's popped up at the IRS this year.  This was brought up earlier this month at our regional Stakeholder Liaison Teams meeting so they're going to run it up the flag pole.

Rick

[judys3]

The issue I see with this is the fact you E-filed the return in February and the client didn't pay until April 15th. It would be from the date the return was filed not the date he got the cashiers check and then decided to hold. For that amount of money he would have needed to pay ES Payments

[sjrcpa]

Even if you file in February, the tax is due April 15.

[abctax55]

@judys3  ".... For that amount of money he would have needed to pay ES Payments".

Not necessarily; perhaps $ 250,000 had already been paid meeting the prior year 110% safe harbor and the $ 81,000 was simply the amount owed due to increased income over the prior year.   And Susan is spot on - the due date of the amount *owed* is still April 15th even if the return is filed much earlier.   

[Accountant-Man]

Since he admitted that the certified check meant that the bank already removed the money from his account, what was the point of holding onto the check until April 15? Keeping it from the government?

Pay the $850. Maybe you can get the penalty removed.

[David Stone]

If the IRS does not grant the penalty request for reasonable cause, you can ask for a First Time Abatement (FTA). If your client has not had any penalties for the past three years, he will qualify for this. Either call the Practitioner Hotline or send a letter (don't forget to charge)

[sjrcpa]

Maybe the get out of jail free card should be reserved for a potentially larger item. Client is high income/high tax.