Payroll taxes are a significant burden for employers. This isn’t only due to the amount of taxes that must be paid. It is also the administrative aspects of withholding taxes from employees’ paychecks and paying over the right amounts to the IRS at the right time.
Many small businesses use third-party payroll processing services to handle these arrangements. We discussed this type of outsourcing in our February 25 post.
In today’s post, let’s look at an initiative launched fairly recently by the IRS that aims to help employers comply with their quarterly payroll tax duties.
The initiative is called the Early Interaction Initiative. It is ended to facilitate payroll tax compliance by engaging with employers in proactive ways.
One aspect of this program is educational. The initiative seeks to make sure employers understand their obligations and make their payments in a timely manner.
But the program doesn’t only aim to educate. It also seeks to intervene early to prevent missed payments from turning into tax delinquencies that get worse and worse as interest and penalties are added.
The IRS Collection unit has long had its field staff engaged in Federal Tax Deposit Alerts (FTD Alerts). These alerts are triggered toward the end of a quarter when IRS data indicate an employer’s payroll tax deposits have gone down. When an alert is triggered, IRS field staff members interact with the employer, trying to identify what is happening and how the employer can come into compliance with payroll tax obligations.
The Early Interaction Initiative will be an enhancement of the process already in place for these FTD Alerts. In essence, the IRS will seek to deploy its internal resources so that field staff can work on more alerts in a prompter manner.
If you are an employer struggling to meet your payroll tax obligations, this doesn’t necessarily mean you will be visited by an IRS agent. But you might very well get a letter.