Updated July 21, 2015
Day Care Nursery Penalties and Interest
Handling penalties and interest in the daycare center / nursery school industry
If you have a Daycare or Nursery School, penalties and interest can become a difficulty.
One of the most common problems presented to Public Accounting Firms in Chicago by newer customers is the issue of day care nursery penalties and interest. the assessment of penalties and interest on taxation issues seems to have reached epidemic proportions. the first reason behind this is that in prior years, while our President, Congress, and State Legislatures have not significantly raised income, payroll, and sales tax percentages, in many cases they have doubled penalties. Interest on unpaid taxes has always been extremely high. By raising penalties they are able to significantly increase their revenues without receiving the deadly press associated with raising taxes.
Another significant difference is that now, in most cases, the process is completely automated. In prior years, revenue officers and agents viewed most or all penalty and interest notices prior to assessment. Now, in many instances, this is all done by machine. If a return or payment is off by pennies, it might cost upwards of $100. the whole concept of reason seems to have been replaced by a strict, numerical adherence to the tax law as it is programmed into machines.
Further, the collection process of these unpaid taxes, interest, and penalties, in many cases if not addressed timely, is not handled by the taxation agency itself, but rather turned over to an outside collection agency. Have you ever tried to reason with a collection agency? What if the tax, interest, or penalty is unfair? Have you ever tried to explain tax law to a collection agency telemarketer so that the bill can either be eliminated or adjusted? Its not easy. Have you ever tried to get a case referred back to the taxation agency so that you can talk to a revenue officer or agent that can adjust a tax bill? Generally the collection agencies don’t want to do this because they will not make money if it leaves their office or if someone back at the taxation agency reduces or eliminates the bill.
If you have a daycare or nursery school, these situations can become very expensive and difficult. Given the deficit environments that our Federal and State Governments are currently operating in, we see no end in sight to this cycle.
So, if you or your center has been assessed day care nursery penalties and interest on a taxation matter, what can be done to reduce or eliminate these statutory additions? Effective procedures in handling these situations vary substantially between tax types and different agencies. Income Tax Liability Penalties versus Payroll Tax Penalties are completely different situations. the way that Sales Tax Penalties such as Failure to Pay or Failure to File additions are handled is completely different from the penalties associated with the failure to make timely Estimated Tax Deposits. If these additional taxes are related to a corporate problem versus a personal problem, solutions vary. Of course there are completely different rules between the individual taxation agencies. the way that penalties and interest are abated at the Internal Revenue Service is different than how it is done at the Illinois Department of Revenue.
Our best advice is that you do not try to deal with these situations yourself. Your most basic right as a taxpayer is the right to representation. Seek competent representation today.
Do not try to face this on your own.
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Chris Amundson is the President of Accounting Solutions Ltd., a full service public accounting firm of Certified Public Accountants and Enrolled Agents handling the bookkeeping, accounting, tax preparation, and audit representation needs of Businesses, Estates, Trusts, and Upper Income Individuals.