
INSIGHTS FROM OUR NATIONAL TAX OFFICE	DECEMBER 11, 2015

New IRS Payroll Deposit "Help" Initiative

On Dec. 8, 2015, the Internal Revenue Service launched what they say is "a new initiative designed to more quickly identify employers who are falling behind on their payroll or employment taxes and then help them get caught up on their payment and reporting responsibilities. The effort is called the Early Interaction Initiative (EII)," according to the news release (IR-2015-136).

The release states that "two-thirds of federal taxes are collected through the payroll tax system." That means timely collection of payroll taxes is better for the IRS. But before this new initiative, it could take many weeks or even months before the IRS noticed a payment delay and contacted the employer about any undeposited payroll taxes. However, under the new EII, the IRS Commissioner John Koskinen says "we will be able to offer help [to employers]...sooner, when it can often do the most good."

What the Help Entails

Noting that funds required to be withheld from an employee's paycheck no longer belong to the employer, and that the employer has a fiduciary responsibility to handle these trust funds according to prescribed IRS guidelines, the IRS is particularly interested about withholding tax dollars being inappropriately diverted for the employer's use, no matter how well-intentioned that purpose may be.

To head off the possibility of withholding tax dollars being misused by an employer, the IRS will do one or more of the following under the new EII:

Monitor employer withholding deposit patterns to identify those employers whose payments decline or are late.
Send a letter to any identified employer reminding them of their responsibility to make timely and complete payroll filings and deposits.
Make automated phone calls providing information related to payroll withholding and payment requirements and offering assistance.
When deemed appropriate, dispatch an IRS revenue officer to the employer's place of business.

Clear Message

The message from the IRS for employers is clear-if an employer is having cash flow problems and is thinking about using employee's tax withholding dollars for a short-term loan to solve those cash flow issues, the IRS has just shortened the timeline before that action becomes an even bigger problem than cash flow.

Contact your Eide Bailly professional with questions or for assistance preventing payroll deposit issues from becoming a bigger problem.

Eide Bailly's National Tax Office serves as a resource for clients to help analyze complex tax issues related to business decisions. Our professionals are committed to helping clients stay informed about tax news, developments and trends through various specialty areas, including cost segregation studies, wealth transfer, state and local taxation, international tax, IRS controversy and procedures, R&D tax incentives, tax-exempt organizations, tax legislation, accounting methods and pass-through entities.

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