Just got a client that received a CP259 Notice for 2Q 2018. Deposit was timely made but apparently the IRS did not process/receive the quarterly 941 return. Client claims it was sent, but did not send it via Certified Mail.
Just to be clear:
1. There should no failure to file penalty in this case if the actual deposit was timely made, thus there is no tax due.
2. Therefore, it becomes a case of filing the return pursuant to the notice letter for matching purposes when the client files the W-2 for 2018.
However, my question is how to approach the “reasons why you didn’t file” on page 2 – i.e. what proof does the taxpayer really have, or does it even matter if the deposit was timely paid over in the first place.
What I’m thinking: Send in a copy of the return that was presumably mailed, and state that the client sent it in via regular mail and attach the timely proof of deposit with EFTPS.
I would do exactly what you suggested. If the client has no prior history of filing late, it’s probably a slam dunk for abatement of any penalty. However, I do not believe that timely depositing the taxes would in and of itself be reasonable cause but would certainly be a favorable factor.