IRS Reports Automatic Alerts for Missed Employment Tax Payments Already Improving Compliance

In a previous post, we discussed the improved automated system that the IRS implemented to issue more timely and accurate federal tax deposit (FTD) alerts to employers that may owe employment taxes at the end of a quarter.  FTD alerts are generated automatically by the Electronic Federal Tax Payment System (EFTPS) and notify employers of potential employment tax violations by comparing  employment tax deposits against those made during the same quarter in the previous year.  The IRS has improved the algorithm used to identify potential missed payments.   Previously, the system would not generate an FTD alert to the employer until the 13th week of the quarter.  The new algorithm allows the IRS to predict when an employer may owe employment taxes at quarter end, which will allow the agency to issue FTD three times during the quarter.  According to a director in the IRS Small Business/Self-Employed Division, Darren Gulliot, the IRS has been studying employers’ responses to certain types of IRS outreach, such as field visits, soft notices, and prerecorded messages, to determine the most effective types of outreach.  These combined efforts have resulted in a more than 50% decrease in the number of FTD alerts issued during the first three months of 2016 when compared to that same time period in 2015, and the alerts issued have become more accurate, meaning that fewer employers will receive FTD alerts, but the ones who do receive them will likely be liable for employment tax that quarter.

The IRS is modifying the system to notify the IRS of potential missed payments within 48-72 hours rather than 12-13 weeks under the current system.