Form 945 is an "annual report" used to report the tax deposit liability on pension distributions each year. This annual report requires "deposit liabilities" to be accumulated and shown "monthly." The form does not break liability accruals into three day segments like the standard Form 941 does.

Due to the Form 945 not containing the three day breakdown, the IRS is unable to determine when the the actual liability arose, and the IRS assumes the liability accrued during the first 15 days of any month. Therefore, if both the pension distribution and required tax deposit were made on 12-30-YR, the IRS will assume the deposit was made 5 to 15 days late. This assumption results in the entity being charged a 5% penalty on the amount of the timely tax deposit which was processed with a Federal Tax Deposit Coupon.

Accordingly, it is critical for all Form 945 filers to review any penalties notices they have received to ensure the IRS has not followed this same procedure in making erroneous penalty assessments. 

To ensure any penalties assessed are correct, the practitioner must compare all distribution dates, federal tax deposit receipts, the front and reverse of the checks for distributions and tax deposits and determine the total liabilities due and deposit requirement dates to ensure any penalties which are asserted are actually applicable and correct.
 
Based on the situation I ran into on a 1998 annual report, it is impossible to determine how many erroneous penalties have been asserted, and how may people have paid penalties they did not owe. 

Thus, I have:
(1) notified the IRS of this "systemic problem,"
(2) made suggestions for the IRS system corrections to prevent this situation from reoccurring,
(3) asked the IRS to review all Form 945's with penalties to ensure they obtain written confirmation from taxpayers in all cases of actual liability dates and deposit amounts before penalty assessments are made,
(4) asked the IRS to abate all erroneous assessments, and
(5) requested that the IRS refund all payments collected which were not due to the IRS.