IRS Issuing Erroneous CP14 Notices

One of our clients received a CP14 Notice alleging she owed the late payment penalty (“Failure to Pay under Internal Revenue Code Section 6651). The notice noted he had an unpaid balance of $583 as of July 15, 2020 on 2019 tax of $8,855. The late payment penalty is assessed on the unpaid balance as of the tax filing deadline. If you have paid 90% of the tax due by the tax filing deadline, there is no late payment penalty.

If you do the math you will see that my client paid $8,272 of the $8,855 she owed, or 93.4%. That’s more than 90%, so the late payment penalty should not have been charged. I spoke with an individual at the Practitioner Priority Service (PPS), and this is the second such case he’s seen. However, it’s not happening with all such individuals as another client with a similar balance due did not receive a CP14 notice.

As we tell all of our clients, do not assume a notice from the IRS is correct. Indeed, the last study on IRS notices shows that about two-thirds of IRS notices are wrong in part or in whole. If you have any doubts, ask your tax professional.

In this case, the helpful individual at PPS reversed the penalty, so my client doesn’t need to pay anything. Still, it would be better if the IRS didn’t issue erroneous notices but given everything that happened during 2020 some hiccups are to be expected.

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