Insights: Article

New IRS Payroll Deposit "Help" Initiative

December 11, 2015

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.

Latest Insights

February 15, 2019
The purpose of this whitepaper is to provide construction entities with a quick and understandable reference guide for common issues in construction accounting. We have covered several topics we commonly receive questions about in the construction…
February 15, 2019
If a lien has been filed against you, it’s important to understand your options for release, discharge and subordination.
February 14, 2019
Firm News
The union adds a new office and state to the regional CPA firm and adds additional ERP talent to their growing NetSuite practice.
February 12, 2019
Your employees are the people most likely to catch fraud in the workplace. But how can you help them get over their fears of reporting it?
February 11, 2019
If you receive a letter from the IRS, it’s important to open it right away. This article outlines different types of IRS correspondence and what each one means for you.
February 11, 2019
The IRS is garnishing your wages. Now what? We break down wage garnishment and steps you can take to deal with this practice.