IRS late notice. (Photo: Pixabay)

If you received a notice regarding a failure-to-deposit penalty on employment taxes last Memorial Day, expect a mea culpa from the IRS. (Photo: Pixabay)

The IRS has announced that it erroneously sent out notices that indicate that taxpayers made late deposits of employment taxes that were due around Memorial Day, 2016. The agency says, however, that impacted taxpayer accounts will be corrected without the taxpayers taking any action.

Depending on several factors, including the amount of employment taxes that an employer reported for the “lookback period,” an employer may have to deposit those taxes monthly, semi-weekly, or the next day. However, there are special rules that apply if the day that would otherwise be the due date is a Saturday, Sunday, or legal holiday. See, for example, Regulation § 31.6302-1(c)(2)(i) and Regulation § 31.6302-1(c)(3).

As a result of the Memorial Day holiday observed on May 30, 2016, the next-day deposits that would have been due on Monday, May 30, were instead due on Tuesday, May 31, and the semi-weekly deposits that would have been due on Wednesday, June 1, 2016, were instead due on Thursday, June 2, 2016.

The IRS has now acknowledged that, due to a programming error, its systems did not recognize changes in deposit due dates created by the Memorial Day holiday and that it incorrectly sent notices to certain next-day and semi-weekly depositors that their deposits were late.

No further taxpayer action is required. The IRS systems have been corrected, and impacted taxpayer accounts will be updated.

Taxpayers who received a notice (CP161) about a failure-to-deposit penalty as a result of this error will receive a new notice of adjustment (CP210/220) stating that the account was corrected and they do not owe a penalty. Taxpayers who received a notice (CP276B) stating that their deposit was made incorrectly but that the IRS waived the penalty will not receive any follow-up correspondence.