Abatement of interest and penalties on payroll taxes.

• Jurisdiction: United States
• Date: 01 October 1997
• Author: Lucero, Tessa C.

Look carefully at the date payroll taxes were required to be deposited when requesting abatement of penalties for failure to timely deposit such taxes and the related interest. The first Taxpayer Bill of Rights, which was part of the Technical and Miscellaneous Revenue Act of 1988, granted taxpayers various rights in dealing with the IRS, provided procedures for taxpayers regarding the Service and extended the Tax Court's jurisdiction. A follow-up Taxpayer Bill of Rights 2 (TBOR2) was enacted on July 30, 1996. Among the new laws are provisions dealing with abatement of interest and penalties. The new laws cover expansion of IRS authority to abate interest, Tax Court review of the Service's refusal to abate interest, extension of the interest-free period for payment of tax and abatement of the penalty for failure to deposit payroll taxes.

Prior to TBOR2, the IRS'S power to abate overpaid interest on delinquent taxes was very limited, and the Code did not extend that authority to include employment taxes. This earlier provision is supported in Speers, Fed. Cl. Ct., 6/23/97. The taxpayers were partners in a machine shop in California. The...