The rules related to State and Federal interest and penalty computations are so complicated, even IRS and State computers can’t always get it right and the employees can’t keep up with the changes. A review of the taxpayer’s account records can identify common errors. Examples of common errors include:
- The taxing authority manually inputs an interest assessment. Subsequently, payments are moved into the account that were improperly posted to a different account. The computer may or may not be able to recompute the interest based on the new payment dates.
- An amended return is filed for 2010 that results in an overpayment. That overpayment is refunded with interest in 2016. In 2015 there is an assessment for 2012 and the IRS sends a bill for the tax and interest. The interest will be incorrect because the IRS computer cannot compute interest using the interest netting rules. Specialized software is required to be used by IRS employees, but this is not done automatically.
Why should I have this done?
Many errors can be caught during the regular course of doing business by a taxpayer’s tax department or their representative. However, the rules related to how interest and penalties should be computed are so complicated, that most tax directors and general tax consultants can’t keep up with the rules. The IRS and many states have issued over 500 revenue rulings or revenue procedures dealing with the correct computation of interest and penalties. This voluminous guidance doesn’t include the even greater volume of court cases or other published guidance dealing with the correct computation of interest. In addition, specialized software is required is many cases. Also, the ability to read and understand the detailed transcripts allows our interest specialists to see things that are often overlooked or unknown to non-specialists.
In addition to having the same specialized software used by the IRS, our interest specialists have years of experience that allows them to accurately compute interest and penalties. The Managing Partner of the Firm’s State and Federal Interest Recovery Services practice has over 25 years of experience reviewing interest computations and has a proven process to review and evaluate the most complex of interest computations.
Simple, Efficient Process:
To get started, we would only need a Power of Attorney for each entity to be included in the review. This will allow us to request the transcripts on your behalf. Once we receive the transcripts, an interest specialist will do a preliminary review to determine if there are any years that may have incorrect interest or penalties assessments and require more detailed analysis. The total initial time investment for your tax department should be less than a few hours.