The IRS recently announced the Early Interaction Initiative (EII) in attempts to prevent payroll tax delinquencies before they start. Currently, the IRS Collection division is notified whenever an employer’s federal tax deposits decrease from historical deposit amounts, known as Federal Tax Deposit Alerts (FTD Alerts). When this occurs, an IRS field staff member meets with the employer to determine if there is a delinquency, and if so, to work with the employer to resolve the matter.
The EII is an attempt to accelerate the FTD Alert process. One change is an upgrade in the IRS’s monitoring system to process FTD Alerts more quickly. Additionally, rather than relying solely on field staff to address every FTD Alert, the IRS will start mailing out letters to employers requesting an explanation for any decrease in federal tax deposits. The IRS anticipates that these changes will increase the case load for collection field staff, so a priority will be given to employers with a history of delinquent federal tax deposits.
Do you have questions about the IRS or audits? Contact a Sacramento tax lawyer of NewPoint Law Group, LLP.
Avoid the Trust Fund Recovery Penalty
The IRS and state taxing agencies take a zero tolerance position concerning delinquent payroll taxes. Payroll taxes that are withheld from an employee’s wages are considered trust fund taxes, because they are held in trust for the employee—they are not the employer’s funds to spend. When money gets tight, business owners are sometimes faced with a decision to pay the IRS, or other vendors that may seem more important at the time.
Great care should be taken in this situation. Not only does the IRS assess late payment penalties and interest, but, the business owner will likely be held personally responsible for the trust fund portion of any unpaid payroll taxes, known as the Trust Fund Recovery Penalty.
Additionally, should the business ultimately fail, the Trust Fund Recovery Penalty negates any protection a corporation or other business structure may have provided, since the business owner’s personal assets would be at risk for the penalty.And unlike most business-related debts and other taxes, the Trust Fund Recovery Penalty is never dischargeable in bankruptcy.
How Can a Sacramento Tax Attorney at NewPoint Law Group, LLP Help?
A Sacramento employment and sales tax audit lawyer of NewPoint Law Group, LLP will have significant experience working with business owners who fall behind on their payroll taxes. Please contact us if you receive a letter from the IRS or a visit from an IRS Revenue Officer by calling 800-358-0305.