The tax attorneys at Nardone Law Group in Columbus, Ohio routinely help individuals and businesses who have been contacted by a revenue officer with the Internal Revenue Service. Revenue officers with the IRC are responsible for collecting past due taxes. As an example, the IRS has significant power to collect delinquent tax debts from employers who fail to deposit employee payroll tax withholdings. Two ways in which the IRS can collect on delinquent tax debts is by filing a Notice of Federal Tax Lien or Notice of Intent to Levy. Taxpayers who find they are unable to pay their taxes and their associated penalties should know that the single worst course of action is inaction. To help alleviate their concerns, we typically talk to our clients about collection alternatives. However, these repayment options decrease as employment tax delinquencies begin to pyramid.
Early Interaction Initiative
On August 7, 2015, the IRS Collection launched an Early Interaction Initiative aimed at helping employers understand and meet their payroll tax responsibilities. The goal of the initiative is to prevent missed payments from becoming delinquencies and delinquencies from pyramiding out of control. The initiative may help reduce employment delinquencies, along with interest and penalties, which may accrue as a result of an employer missing required payments. The purpose of the initiative is to help IRS Collection preclude delinquencies where it can and keep delinquencies at a minimum by speeding up the Federal Tax Deposit Alert process.
Federal Tax Deposit Alerts
Federal Tax Deposit (FTD) Alerts occur when IRS Collection records indicate that an employer’s payroll tax deposits have declined. Prior to the initiative these cases were sent to the Field Collection staff near the end of the quarter but before the quarterly payroll tax return was due. The goal, as is now, is to meet the employer, determine whether there was a missed payment or delinquency, and if so, help to get it paid and the employer to sustain payroll tax compliance.
Changes to the FTD Alert Process
The Early Interaction Initiative will accelerate and enhance the FTD Alert process to allow field officials to work more FTD Alerts more quickly. The IRS is adjusting its systems to issue FTD Alerts as soon as possible. Since the IRS does not have the resources to visit every employer whose payroll tax deposits have declined, the Field Collection staff will target cases with preexisting delinquencies first. If an employer offers an explanation for the decline in deposits (e.g., a cut in staff or a reorganization), the case will be closed.
However, due to limited resources, many employers will receive a letter stating that because their payroll deposits have decreased, they must contact the IRS by letter or phone to explain the decrease in deposits. The letter will also inform the employer of their responsibilities and of the consequences of not complying with those responsibilities. Where a delinquency exists, Field Collection will work with the employer to correct the delinquent condition going forward.
What Happens if an Employer Fails to Deposit Payroll Tax?
Employers withhold income and Federal Insurance Contribution Act (FICA) taxes from employees’ gross pay and hold it in trust until they are required to deposit it, along with their share of FICA taxes, with the Treasury. However, many employers feel pressured to use these funds as working capital when they are facing liquidity difficulties. When the FICA taxes are not deposited, the Social Security and Medicare trust funds suffer. When withheld income taxes are not deposited, the employee still gets credit for those withholding, but the rest of the taxpaying public makes up the difference and pays for their refunds and benefits.
When an employer misses payments because it is diverting funds, the result is employment tax delinquencies, along with interest and penalties. These delinquencies and penalties can accumulate or pyramid beyond what the employer is able to repay. The early FTD Alerts are aimed at detecting these missed deposits at an early stage in order to keep the employer’s options for repayment available.
The lesson here is to stay on top of your payroll taxes, because the IRS will start notifying businesses by mail when noticeable declines in deposit frequency occur. If you are behind on your payroll tax responsibilities, it is import to speak with an attorney to discuss collection alternatives before your options become limited.
Contact Nardone Law Group
Nardone Law Group represents individuals and businesses with federal tax issues, including those who have fallen behind on their tax payments to the IRS. The tax attorneys at NLG have vast experience in representing individuals who owe money to the IRS. If you are struggling with tax liabilities or are interested in working with the IRS to review collection alternatives, you should contact an experienced attorney. Our experienced tax attorneys will thoroughly review you case to determine what options and alternatives are available. Contact us today for a consultation to discuss your case.