No, not another radical terrorist group; sad to say we’ve too many of those. This is the Section 6721(e) chop imposed when an employer fails to file timely the annual Forms W-2 with the Social Security Administration (SSA). And no, I didn’t know about that chop either.

But ex-Ch J Maurice B (“Mighty Mo”) Foley knows all about it, and tells us all in Piper Trucking & Leasing, LLC, 160 T. C. 3, filed 9/14/23.

If one is an employer with FICA/FUTA/ITW obligations , one must file W-2s with Form W-3 transmittal with SSA; nonfilers wind up in IRS’ Combined Annual Wage Reporting (CAWR) computer database. Ex-Ch J. Mighty Mo tells the story.

“The SSA sends two warning letters to employers that fail to file these forms. The first letter informs the employer to either respond or file the missing forms. The second letter warns the employer that the matter will be referred to the Internal Revenue Service (IRS) to determine whether penalties are applicable. If an employer fails to respond to both letters, their name is added to a database. Every year the SSA transfers this database to the IRS. Following the transfer of the database, the CAWR computer program automatically sends the employers in the database a Letter 98C asserting a section 6721(e) penalty. If the employer does not respond to the Letter 98C, the IRS, through the CAWR computer program and without any human intervention, assesses the section 6721(e) penalty.” 160 T. C. 3, at p. 2.

Well, Piper didn’t file, so got the 98C, and went to Appeals. Do we hear the thundering hoofbeats of the Boss Hoss?

Appeals didn’t, and issued a NOD sustaining the NFTL. Piper did, opposed the NOD alleging want of Boss Hossery, and petitioned the NOD. Summary J for IRS denied for want of Boss Hossery. IRS tries again, and this time gets it right.

Section 6751(b)(2)(B) stables the Boss Hoss when the chop is automatically calculated through electronic means.

Ex-Ch J Mighty Mo: “Because petitioner failed to respond to the Letter 98C, the underlying section 6721(e) penalty was determined through respondent’s CAWR computer program and did not involve human intervention. Therefore, the underlying section 6721(e) penalty was ‘automatically calculated through electronic means.’ See Walquist v. Commissioner, 152 T.C. 61, 70 (2019)(concluding that an accuracy-related penalty issued without human intervention through the IRS’s Correspondence Examination Automated Support computer program was automatically calculated through electronic means). Thus, section 6751(b)(2) dictates, and we hold, that a section 6721(e) penalty assessed through respondent’s CAWR computer program is not subject to the section 6751(b)(1) supervisory approval requirement.” 160 T. C. 3, at pp. 3-4.

For the Walquist story, see my blogpost “I Sing the Penalty Electronic – Part Deux,” 2/25/19.

As Piper had no CA, summary J for IRS.

Oh, the inhumanity!