By Steven D. Mercatante, Esq.
Once you know what to look for in regards to identifying the Form 972-CG “Proposed Penalty Notice” its time to zero in on what you need to know to process a response to the IRS. In addition, for your future compliance needs you will also want to get started on putting in place the policies and procedures necessary to help you efficiently process and respond to this particularly dreaded form of communication from the IRS. Both goals can be met through understanding why you may receive a Form 972-CG and how you should initially respond to any potential penalty notice no matter how inconsequential it may seem.
There are three simple reasons the IRS may send you a Proposed Penalty Notice:
• You did not file on time
• You did not file electronically if you needed to because you submitted over 249 of the same type of 1099
• You filed, but with incorrect information:
Name/TIN mismatch
or
No TIN
Ok, that was simple; now let’s look at a real world situation and one tremendous mistake recipients of the Form 972-CG often make – this example will go a long way toward helping you set up your Proposed Penalty Notice processing procedures. Assume it is the end of August or perhaps some time shortly thereafter and your organization has received a Proposed Penalty Notice. You carefully open the envelope, expecting to see some horrific fine; instead, you are confronted with a relatively inconsequential amount of money. No problem you think, why go through the trouble of fighting this amount, after all, by the time you and your team put together an effective waiver request letter (we will get to what this is shortly) the cost in time and money would be greater than just paying the stupid fine. After consulting with management, you get the green light and pay the penalty. Although this scenario happens thousands of times each year all across the country, you must not make the same mistake…