IRS to Receive Automatic Notice of Missed Employment Tax Payments

Post by
March 7, 2016

As of September 2015, unpaid employment tax reported on voluntary returns amounted to $59 billion, a number the IRS hopes to decrease by preventing employers from accruing the substantial employment tax deficits currently plaguing the system. Darren Guillot, a director in the IRS Small Business/Self-Employed Division, announced that the IRS intends to take a more “proactive” approach to employment tax situations, part of which will involve an update to the Electronic Federal Tax Payment System (EFTPS) that will enable the system to alert the IRS within 2-3 days after an employer misses an employment tax deposit. This change serves as an improvement to the current system, which can take over three months to notify the IRS of missed employment tax. By that time, a business has often fallen into significant arrears.

Employers who fall behind on employment tax payments and are identified by the new alert system can expect outreach to begin December 2016. The outreach will at first come in various forms, as the IRS plans to examine which forms of outreach are most effective and which employers will react more favorably. From a practical perspective, this represents a much needed and proactive compliance move. Taxpayers that fall into a pattern of nonpayment for trust fund taxes (e.g., payroll taxes, backup withholding, withholding under Chapter 3 and Chapter 4 of the Code) often are using the withholdings to pay other creditors. When this happens, personnel known as “responsible persons” under the law may become personally liable for the nonpayment of tax. By delaying contact with taxpayers regarding the nature of severity of the situation, taxpayers and those responsible persons who make these decisions often create financial burdens from which they may never recover.