IRS institutes Early Interaction Initiative for Employment Tax matters
It is expected that the IRS will be instituting swifter action against employers that are falling behind on their Federal Tax Deposits (FTD’s) for employment taxes. Those taxpayers who have had interaction with a field Revenue Officer are likely hearing from those Revenue Officers more quickly if they fall behind on their required deposits. However, the IRS announced in December 2015 that it is instituting efforts to identify employers who appear to be falling behind on their tax payments – apparently even before their employment tax return is being filed.
The IRS has indicated that their identification efforts will result in letters, automated phone messages, and other communications which could include a visit from a field Revenue Officer. The IRS has indicated that this effort will reduce the likelihood of the problem becoming uncontrollable. Many taxpayers simply do not realize how steep the penalties can be for failure to properly make tax deposits, pay employment taxes timely, or failure to file timely returns. Further, it is unlikely that most taxpayers understand the personal liability that can be assessed from unpaid employment taxes. A liability that is not dischargeable in bankruptcy.
While the education efforts are beneficial, certainly there is an enforcement aspect of this activity by the IRS. The IRS readily admits that two-thirds of federal taxes are collected through the payroll tax system. With a reduced budget, this activity makes good sense for the IRS. However, it is most likely going to be most burdensome for small businesses.
No doubt early action is best. If you know you have been falling behind on your payroll tax obligations and need assistance planning before you hear from the taxing authorities, feel free to call.