If your business has experienced an unexpected downturn or failed to be as profitable as you hoped, it can be difficult to keep up with your regular federal tax deposits. While it’s entirely possible that things may turn around soon, allowing you to catch up on your tax debt, the IRS frowns on companies that don’t pay on time and in full, and sooner or later you will receive a Notice CP187.
While getting an IRS notice is a particularly stressful experience when you’re already going through a difficult time, a qualified and experienced tax law attorney can help you reach an acceptable and sustainable payment arrangement with the IRS. You’ll have the peace of mind you need to focus on steering your business onto stronger financial ground.
What is the CP187 Notice?
The IRS sends you this notice because:
- You filed a business tax return that has a balance due, and
- You have not paid the balance yet.
The CP187 notice typically involves Form 941, which employers use to report the income taxes, Social Security tax, or Medicare tax withheld from employee paychecks and pay their portion of the Social Security and Medicare taxes.
Receiving any kind of collection notice from the IRS calls for prompt action, especially if you aren’t in a position to pay the balance. Consultation with a New Jersey tax lawyer will help you understand your options and identify the best way to respond to the notice.
What to Do When You Receive a Notice CP187
If you receive notice CP187, it’s essentially a reminder that you owe a balance. The IRS is not yet actively seeking enforcement, so there’s time to consult with an attorney and go over the various options for relief, which may include:
- Payment plans that allow you to repay the debt over time. If you owe $25,000 or less in business taxes, you can apply for an in-business trust fund express installment agreement. If you owe more, you can make a lump sum payment beforehand to reduce the balance to $25,000 or you can negotiate a payment plan that pays the balance over a longer time period.
- An offer in compromise that lets you settle your tax liability for less than the amount owed. The IRS has strict standards for accepting offers in compromise, but if you qualify, a tax attorney can help you present a compelling case.
The Risks of Ignoring an IRS CP187 Notice
The notice deadline for CP187 is 21 days. If you miss it, interest and penalties will continue to accrue.
With unpaid payroll taxes, the following penalties apply:
- A failure to deposit penalty that ranges from 2% to 15%, depending on how late the deposits are made.
- A failure to file penalty, which is 5% per month, up to 25%.
- A failure to pay penalty of 0.5% per month.
Even if you set up a legal entity to shield your personal assets from your business liabilities, the Trust Fund Recovery Penalty allows the IRS to pierce the corporate veil and hold you personally liable for the unpaid business taxes. When this happens, the government may file a Notice of Federal Tax Lien or issue a levy against your personal assets. You could also risk criminal penalties, so your recommended option is to hire a tax attorney to help you resolve the situation.
Speak with a New Jersey IRS Tax Attorney about IRS Notice CP187
If you have received a CP187 Notice, contact Paladini Law by calling 201-381-4472 or filling out our online form for a consultation. Attorney Brad Paladini has helped many New Jersey business owners satisfy their tax debts in ways that reduce penalties and save money.