TIGTA Reports on Deferred Social Security Taxes and Finds Some Incorrect Penalties

During the height of the COVID-19 pandemic, many employers took advantage of relief measures that allowed them to defer the deposit and payment of the employer’s share of Social Security taxes. This provision was designed to provide immediate cash-flow relief, with deferred amounts split into two installments due at the end of 2021 and 2022.

Recently, the Treasury Inspector General for Tax Administration (TIGTA) released a report reviewing the IRS’s handling of these deferrals. While the program largely operated as intended, TIGTA found that in certain cases penalties were assessed incorrectly, raising concerns for affected businesses.

What TIGTA Found

• Incorrect Penalties: Some employers who paid their deferred taxes on time were still assessed late-payment penalties. TIGTA noted this was due to IRS system programming and processing errors rather than taxpayer fault.

• IRS Adjustments: Once identified, the IRS corrected many of these penalties, but TIGTA emphasized that not all errors were caught automatically.

• Taxpayer Burden: In some cases, business owners had to contact the IRS, provide proof of timely payment, and request abatement — consuming time and resources at a moment when many were still recovering financially.

What This Means for Employers

If your business deferred Social Security taxes during 2020 and made payments in 2021 and 2022, it is important to review your IRS account transcripts and payment history. Even if you believe your account is settled, errors may have occurred. If you notice a penalty that appears inconsistent with your payment records, you should:

• Verify the payment date against the IRS due date.

• Contact the IRS or your accountant promptly to request correction.

• Keep all payment confirmations, bank records, and correspondence in case of future inquiries.

The Role of Professional Guidance

IRS reporting systems are complex, and errors — even when acknowledged — can take time to correct. Working with an accountant experienced in tax resolution can help you identify incorrect penalties, file the right requests, and ensure your records are accurate.

At Pivotal Forensic Accounting & Audits, we assist businesses in navigating IRS notices, reconciling accounts, and disputing penalties that were assessed in error. The TIGTA report underscores the need for vigilance and professional oversight, especially when relief programs and IRS processing intersect.