Penalty for failure to deposit taxes under CARES Act (Chief Counsel legal advice memo)

Penalties that may apply to a failure to deposit employment taxes that were deferred in 2020 pursuant to CARES Act section 2302

Penalties that may apply to a failure to deposit employment taxes that were deferred

The IRS today publicly released a legal advice memorandum* (from the Office of the Chief Council)—PMTA-2021-07 [PDF 131 KB] (dated June 21, 2021)—regarding penalties that may apply to a failure to deposit employment taxes that were deferred in 2020 pursuant to CARES Act section 2302.  As discussed in that memorandum, the section 6656 failure to deposit penalty for employment taxes deferred under the CARES Act will apply to the entire deferred amount if any portion of the deposit (now due in December 2021 and December 2022) is delinquent.  Read TaxNewsFlash

Organizations that took advantage of the CARES Act opportunity to defer payment of payroll taxes in 2020 will soon owe the first installment of those deferred taxes—it is due  on December 31, 2021 – and they should take great care to make sure that the payment is on time.  As explained in a recently issued Chief Counsel memorandum, because the CARES Act deferral was conditioned on timely payments of deferred amounts in 2021 and 2022, if either of those  payments is late, then the entire deferral will be invalidated, the whole amount deferred will be considered late, and late payment penalties will apply.

*Legal advice memoranda are signed by executives in the National Office of the Office of Chief Counsel and issued to Internal Revenue Service personnel who are national program executives and managers. The memos are issued to assist IRS personnel in administering their programs by providing authoritative legal opinions on certain matters, such as industry-wide issues. The memos cannot be used or cited as precedent.

For more information, contact a tax professional with KPMG’s Washington National Tax practice:

Ruth Madrigal | +1 202 533 8817 | ruthmadrigal@kpmg.com

Preston Quesenberry | +1 202 533 3985 | pquesenberry@kpmg.com

Carrie Garber Siegrist | +1 202 533 3056 | carriesiegrist@kpmg.com

 

The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organization. KPMG International Limited is a private English company limited by guarantee and does not provide services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.