Automatic Data Processing, Inc. · NASDAQ:ADP
Automatic Data Processing — ADP TAXS Webinar: Penalty & Interest: What You Don't Know Can Hurt You (June 2011)
44 slides from Automatic Data Processing's conference presentation, Jun 21, 2011
Slide 1: Penalty & Interest: What You Don't Know Can Hurt You
Penalty & Interest: What You Don’t Know Can Hurt You John Myett & Lisa Boswell An ADP Webcast
Slide 2: Housekeeping
Housekeeping This is one of a number of complimentary webinars that ADP offers to tax and finance professionals each year. Today’s webinar will last for 60 minutes, ending at 1pm eastern time. The last 10 minutes of today’s program have been reserved for Q&A. You can download a PDF copy of t
Slide 3: About ADP
About ADP Listed on NASDAQ: ADP Fortune 300 company Experts in automating business processes such as payroll, HR, benefits administration, procure-to-pay, sales tax automation and tax credits so that organizations can stay focused on the core business 60 years of experience Revenues of $9
Slide 4: CPE Credit
CPE Credit Are you planning to apply for CPE credit for attending today’s webinar? A. Yes B. No C. Not Applicable NASBA (National Association of State Boards of Accountancy) requirements for receiving CPE Credit: •Log in from same e-mail address that you used to register •Stay for the full hour •A
Slide 5: Today's Panel
Today’s Panel John Myett Lisa Boswell 5 ©2011 Automatic Data Processing, Inc. Proprietary and Confidential Information.
Slide 6: Agenda
Agenda Employer Responsibilities Purpose of Penalties Types of Penalties A Note About Interest Common Penalty Scenarios & Prevention Tips All About Abatements 6 Penalties & Interest: What You Don’t Know Can Hurt You | June 2011
Slide 7: Employer Responsibilities
Employer Responsibilities 7 Penalties & Interest: What You Don’t Know Can Hurt You | June 2011
Slide 8: Employer Responsibilities: Pay Taxes
Employer Responsibilities Pay Taxes • Taxes are paid as payrolls are processed • Due dates are threshold driven • EFT mandates 8 Penalties & Interest: What You Don’t Know Can Hurt You | June 2011
Slide 9: Employer Responsibilities: File Returns
Employer Responsibilities File Returns • Timely • Accurate • Complete 9 Penalties & Interest: What You Don’t Know Can Hurt You | June 2011
Slide 10: Employer Responsibilities: Information Reporting (W-2/1099)
Employer Responsibilities Information Reporting (W-2/1099) • File timely • Submit in the required format • Make sure you’re in balance • File ALL returns 10 Penalties & Interest: What You Don’t Know Can Hurt You | June 2011
Slide 11: Employer Responsibilities: Documentation & Record Keeping
Employer Responsibilities Documentation & Record Keeping • Bank Statements/EFT records • Records of problems or delays • Medical records, police reports, insurance reports, etc. 11 Penalties & Interest: What You Don’t Know Can Hurt You | June 2011
Slide 12: Employer Responsibilities: Best Practices
Employer Responsibilities Best Practices • Consider foreseeable events • Develop contingency plans • Train back up personnel 12 Penalties & Interest: What You Don’t Know Can Hurt You | June 2011
Slide 13: Polling Question
Polling Question True or False? Employers can delegate their responsibility for depositing and paying their payroll taxes in an accurate and timely manner. A. True B. False NASBA (National Association of State Boards of Accountancy) requirements for receiving CPE Credit: •Log in from same e-mail a
Slide 14: Purpose of Penalties
Purpose of Penalties Penalties exist to encourage voluntary compliance by supporting the standards of behavior expected by the Internal Revenue Code and state regulations. • Define standards of compliant behavior • Provide consequences for non-compliance • Provide monetary sanctions when standards
Slide 15: Types of Penalties: Late Tax Deposits
Types of Penalties: Late Tax Deposits Tax deposits penalized, based on liability date IRS deposit designation Tiered penalty assessments Flat rate penalty assessments 15 Penalties & Interest: What You Don’t Know Can Hurt You | June 2011
Slide 16: Types of Penalties: Late Tax Returns
Types of Penalties: Late Tax Returns Quarterly tax returns Information returns Annual tax returns 16 Penalties & Interest: What You Don’t Know Can Hurt You | June 2011
Slide 17: A Note About Interest
A Note About Interest Agencies charge interest on late payments of tax (and penalties) as a means of recovering lost revenue on the unpaid balance. • Use of funds • Governed by statute • Not subject to abatement 17 Penalties & Interest: What You Don’t Know Can Hurt You | June 2011
Slide 18: Common Penalty Scenarios & Prevention Tips
Common Penalty Scenarios & Prevention Tips 18 Penalties & Interest: What You Don’t Know Can Hurt You | June 2011
Slide 19: Common Penalty Scenarios: Bonus or Unscheduled Payroll
Common Penalty Scenarios Bonus or Unscheduled Payroll • Bonus pay over and above regular pay • Special, prompt payroll processing • Check date vs. period ending date • Constructive Receipt rule • Bonus taxation TIP: Know what you’re paying, and WHEN. Be aware of deposit requirements. 19 Penalties &
Slide 20: Common Penalty Scenarios: Stock Option Processing
Common Penalty Scenarios Stock Option Processing • Process the liability as soon as you have all the information • Be aware of settlement date vs. exercise date TIP: Avoid P&I. Process promptly. $100K liabilities deposited next day. 20 Penalties & Interest: What You Don’t Know Can Hurt You | June 20
Slide 21: Polling Question
Polling Question When reporting non-qualified stock options IRS will generally allow the liability to be reported on the settlement date in lieu of the exercise date. The settlement date may be no more than _____ following the date of exercise. A. 1 Day B. 2 Days C. 3 Days D. 5 Days E. There is no
Slide 22: Common Penalty Scenarios: Business Mergers/Acquisitions
Common Penalty Scenarios Business Mergers/Acquisitions • Reporting wages • Issuing W-2s • IRS ruling TIP: Consult a professional . 22 Penalties & Interest: What You Don’t Know Can Hurt You | June 2011
Slide 23: Common Penalty Scenarios: Business Mergers/Acquisitions
Common Penalty Scenarios Business Mergers/Acquisitions • Finalizing an ID • Why do it? TIP: The agencies won’t know unless you tell them. 23 Penalties & Interest: What You Don’t Know Can Hurt You | June 2011
Slide 24: Common Penalty Scenarios: Quarter End Adjustments
Common Penalty Scenarios Quarter End Adjustments • Completed before return filed • Completed after return filed TIP: Remember the W-2c’s 24 Penalties & Interest: What You Don’t Know Can Hurt You | June 2011
Slide 25: Common Penalty Scenarios: IRS/SSA Out of Balance
Common Penalty Scenarios IRS/SSA Out of Balance • Reporting less to IRS than to SSA could result in penalties • Reporting less to SSA than to IRS could result in penalties TIP: Balance all returns filed to IRS to returns filed to SSA upon receipt of first notice. 25 Penalties & Interest: What You Do
Slide 26: Polling Question
Polling Question True or False? As long as you know you filed returns to both IRS and SSA in balance, you don't need to take any action when you receive a notice from either agency regarding an out of balance. A. True B. False NASBA (National Association of State Boards of Accountancy) requirement
Slide 27: Common Penalty Scenarios: IRS/SSA Out of Balances
Common Penalty Scenarios IRS/SSA Out of Balances • W-2s/1099s are not filed • Tiered penalties assessed on late W-2s/1099s • Intentional Disregard penalty may be assessed TIP: If W-2s or 1099s were not filed, file them as soon as you receive the first notice in order to minimize penalties 27 Penalti
Slide 28: Common Penalty Scenarios: EFT Requirements
Common Penalty Scenarios EFT Requirements • IRS requires EFTPS deposits for nearly all employers • Many states have EFT mandates • Cut off times • Bank notification for debits TIP: Be sure to register, monitor payments on-line, and create back up procedures 28 Penalties & Interest: What You Don’t Kn
Slide 29: Polling Question
Polling Question I use a third party processor to make all of my payroll tax deposits to IRS. Why would I need to register to use EFTPS? A. To submit non-payroll tax payments or deposits. B. To support contingency planning. C. To monitor IRS deposit activity, and ensure that the third party proces
Slide 30: All About Abatements
All About Abatements 30 Penalties & Interest: What You Don’t Know Can Hurt You | June 2011
Slide 31: Abatement Process
Abatement Process Penalty abatement can be requested Interest cannot be abated I have a penalty – what can I do? 31 Penalties & Interest: What You Don’t Know Can Hurt You | June 2011
Slide 32: Abatement Process: Reasonable Cause
Abatement Process Reasonable Cause Any reason that establishes that a taxpayer exercised ordinary business care and prudence, but was unable to comply with the tax law 32 Penalties & Interest: What You Don’t Know Can Hurt You | June 2011
Slide 33: Abatement Process: Reasonable Cause Examples
Abatement Process Reasonable Cause Examples Death or serious illness of the taxpayer Unavoidable absence of the taxpayer Destruction of the taxpayer’s place of business or records Civil disturbances impairing ability to make deposits 33 Penalties & Interest: What You Don’t Know Can Hurt You | Ju
Slide 34: Abatement Process: Ordinary Business Care
Abatement Process Ordinary Business Care Taking the degree of care that a reasonably prudent person would exercise. Making provisions for business obligations to be met when unforeseeable events occur. 34 Penalties & Interest: What You Don’t Know Can Hurt You | June 2011
Slide 35: Abatement Process
Abatement Process Document the events as soon as you are aware Note special circumstances, dates Preventative measures I know I filed or deposited late – what should I do? 35 Penalties & Interest: What You Don’t Know Can Hurt You | June 2011
Slide 36: Abatement Process: Ordinary Business Care Factors
Abatement Process Ordinary Business Care Factors Taxpayer’s reason Compliance history Length of time to correct the non-compliance Circumstances beyond taxpayer’s control 36 Penalties & Interest: What You Don’t Know Can Hurt You | June 2011
Slide 37: Abatement Process
Abatement Process Penalties can’t be abated until they are assessed Research agency rules, deadlines, etc. for abatement Prepare a concise, respectful letter explaining the circumstances TIP: Meet the agency’s criteria 37 Penalties & Interest: What You Don’t Know Can Hurt You | June 2011
Slide 38: Abatement Process
Abatement Process Submit the request Follow up with the agency Provide any additional information TIP: Respond to follow up requests promptly to preserve your rights 38 Penalties & Interest: What You Don’t Know Can Hurt You | June 2011
Slide 39: Abatement Process
Abatement Process Research agency rules for appeal rights Complete and file any special POAs Prepare appeal letter and send it Follow up with the agency Or just pay the penalty and let it go My request was denied – now what? 39 Penalties & Interest: What You Don’t Know Can Hurt You | June
Slide 40: Polling Question
Polling Question How do you currently manage payroll tax compliance? A. We have dedicated staff members. B. We use an in-house software system. C. We use a service provider. D. We use a CPA / Tax Attorney. NASBA (National Association of State Boards of Accountancy) requirements for receiving CPE C
Slide 41: Q&A
Q&A 41 ©2011 Automatic Data Processing, Inc. Proprietary and Confidential Information.
Slide 42: Some Final Thoughts
Some Final Thoughts Keep accurate detailed records Know the agency requirements Plan for the unexpected Balance Information Returns to Tax Filings Respond to agency notices promptly Learn from your mistakes 42 Penalties & Interest: What You Don’t Know Can Hurt You | June 2011
Slide 43: Thank You for Joining Us Today
Thank You for Joining Us Today For information on any of the ADP products or services referenced during today’s webinar: • Phone 800-CALL-ADP or visit www.adp.com For a complete listing of ADP webinars and webinar recordings - go to: • adp.com | tools & resources | events | webinars 43 Penalties
Slide 44: Webinar Program Survey
Webinar Program Survey How are we doing? We appreciate your feedback. Your input will be used to help us plan future webinars for ADP’s Added Value Services. 44 Penalties & Interest: What You Don’t Know Can Hurt You | June 2011