Letter 2811C is good news. The IRS accepted your request to abate the civil penalty for furnishing a false Form W-4. The letter comes from the IRS Withholding Compliance program.
The Penalty Being Removed
The IRS can assess a $500 civil penalty under IRC section 6682 when a Form W-4 statement results in less income tax withheld than a correctly completed form would, and there was no reasonable basis for the statement when it was made. More than one penalty can apply if more than one false W-4 was furnished for the same year.
Why It Was Removed
The IRS abates this penalty when you show a reasonable basis for what you put on the W-4, or when your withholding and credits at the time covered your tax for the year. This is a different standard from the reasonable cause relief used for late filing and late payment penalties.
What Happens Next
- The IRS also generates a separate notice of adjustment showing the change to your account.
- If you already paid the penalty, your request was treated as a claim for refund. Any refund can be applied to other federal tax you owe.
- Keep this letter with your records.
Your Withholding Lock-In
Removing the penalty doesn't automatically release a lock-in letter the IRS sent your employer. The IRS can leave a lock-in in effect unless you provide information supporting a change. A release or modification of a lock-in comes in its own letter.
Going Forward
Make sure any Form W-4 you give your employer now is accurate. A new false W-4 can bring a new penalty.
If you're dealing with a withholding lock-in or other W-4 problems, call us at (813) 229-7100.