Employment tax penalties abated even though not first-time offense

In Custom Stair, the Court determined that Custom Stairs’ failure to make the deposits, in the context of the cascading penalties encountered here, was due in significant part to Hurricane Ivan, the 2008 economic collapse, and the practical fact of the cascading penalties themselves.  For most of the calendar quarters at issue, Custom Stairs actually paid over to the IRS amounts that would have fully satisfied its liability for the current quarter, but the IRS applied its payments to prior arrearages, leaving all or portions of each successive quarter’s required deposits underpaid.

The IRS had essentially argued that if Custom Stairs cannot afford to make its tax payment timely it should go out of business.

The court held that Custom Stairs has exercised ordinary business care and prudence in cutting benefits and payroll, selectively and prudently paying business expenses, and attempting to sell its real property to provide for the timely payment of its tax liability. Therefore. the reasonable cause necessary to negate, in accordance with their terms, the application of the section 6651(a)(2) addition to tax and the section 6656 penalty
is present in this instance.

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The attorneys at The Beliveau Law Group provides legal services for estate planning (wills and trusts), Medicaid (planning and applications), probate (estate and trust administration), business law (formation and operation), real estate (residential and commercial), taxation (federal and state), and civil litigation (in connection with these practice areas). The law firm has offices and attorneys in Naples, Florida; Boca Raton, Florida; Danvers, Massachusetts; Waltham, Massachusetts; Quincy, Massachusetts; Manchester, New Hampshire and Salem, New Hampshire.

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