In an effort to help employers remain current on their payroll and employment taxes, the IRS has launched the Early Interaction Initiative. The goal of the new program is to more quickly identify employers who have fallen behind on their taxes and reporting responsibilities and to help those employers resolve delinquencies, thereby avoiding unnecessary interest and penalty charges. The IRS will communicate with the identified employers through automated phone messages, written correspondence, and even visits in some cases, as well as through other methods.
In previous years, the IRS typically did not attempt to contact employers who were late paying their taxes until much later, at which point the unpaid taxes had usually spiraled out of control. By interacting with these employers early, the IRS hopes to be able to offer assistance weeks or months sooner than in years past. The initiative is a major priority to the agency as the payroll system accounts for two-thirds of federal taxes. Employers are required to withhold Social Security, federal income, and Medicare taxes from their employees’ wages. Payments are made electronically and are usually reported quarterly to the IRS.
Under normal circumstances, employers turn over withheld tax amounts soon after employees are paid. However, employers who find themselves facing difficulties sometimes divert withheld taxes to be used for working capital or other expenses instead. Employers may also fall behind on their tax responsibilities as a result of miscommunication when they have a third party who is responsible for processing and reporting payroll and deposits are not made as required. Even in situations in which required deposits or tax reporting responsibilities are not made due to miscommunication, the business may still be required to pay interest and penalties.
The initiative will monitor payroll deposit patterns and note payments that decline or are late. If a payment is declined or otherwise missed, the employer will be identified, and the IRS will send a letter or automated phone message notifying the employer of the payment issue and asking them to call to speak with a representative if they require assistance.
The best way to avoid tax penalties is to the seek guidance of a seasoned tax professional who is familiar with the ever-changing nature of IRS policies business tax and reporting requirements. Gary M. Kaplan, C.P.A. is available to assist businesses in Florida, Maryland, New York, Utah, and Washington D.C. with tax planning and payroll tax compliance requirements.
