IRS Payroll Tax Initiative

The IRS has always contacted employers after one or more employment tax returns were filed and the full obligations were not paid. Under the recently announced Early Interaction Initiative, the IRS will contact employers (via USPS, automated phone messages, even a visit from a revenue officer) much earlier to more quickly identify those who are falling behind, to bring them into compliance.

Under the old system, unpaid taxes plus interest were out of control by the time the IRS contacted employers. Now, the IRS monitors deposit patterns for employers whose payments are late or decline over time. The identified employers receive a reminder letter or an IRS automated phone message offering information and assistance. An IRS revenue officer may visit some of these employers.

But there’s more.

The notices may be used in future employment-tax enforcement actions by the Department of Justice to prove that employers and responsible persons “willfully” failed to meet their responsibilities. To decide which employment tax cases to pursue, the government looks for willful conduct and repeat offenders who have multiple instances of failing to meet their obligations, a Justice Department official told an American Bar Association meeting. Failing to fulfill employment tax obligations after receiving an IRS contact under the program will be treated as evidence of willfulness, making the taxpayer a likely target for litigation. Employers and responsible persons—in some instances, this may be the bookkeeper—should be aware that these IRS notices are a significant issue.

If your company or client receives one of these letters or automated telephone calls, you should respond quickly and address the issues with the IRS.

Why risk falling behind?