Skip to main content
Payroll TaxesTax Debt

IRS Steps Up Payroll Tax Enforcement

The Internal Revenue Service has rolled out a new program, the Early Interaction Initiative, designed to help identify employers who begin to fall behind in making payroll tax deposits and assist them in meeting their payment and reporting responsibilities.  Employers are required to withhold income tax, Social Security and Medicare tax from employees’ wages and remit them to the IRS.  Often times when a business is encountering financial difficulties it fails to pay over these taxes and continues this pattern until the IRS begins enforced collection activities or the business closes.

The program is an attempt to avoid this situation and help employers stay in compliance and minimize interest and penalties. The goal is to identify employers that appear to be falling behind on their payroll tax obligations even before an employment tax return is filed. The IRS plans to provide information and guidance through letters, automated phone messages, and where appropriate a visit from a Revenue Officer.

Prior to the initiative, the IRS would not contact an employer having payment difficulties until much later, typically after the employment tax return was filed and the employer’s unpaid taxes had already begun to get out of control.

IRS Commissioner John Koskinen stated “With early interaction, we will be able to offer help weeks or even months sooner, when it can often do the most good.”

Letter 903-Possible Criminal Prosecution or Civil Injunction

If a Revenue Officer visits an employer they will give them Letter 903, You Haven’t Deposited Federal Employment Taxes along with Notice 931. These documents explain the employer’s obligation to remit payroll taxes on a timely basis and warn that continued non-compliance with making such deposits can lead to a civil injunction or criminal charges.

According to a report by the Taxpayer Advocate the IRS has lost billions of dollars in tax revenue by failing to have an effective strategy to collect these taxes. This has pushed the IRS and the Department of Justice to make payroll tax compliance a top enforcement priority.

If you have received Letter 903 don’t panic. Criminal prosecution or a civil injunction can typically be avoided except in the most extreme cases. The purpose of the letter is to get your attention and to obtain your compliance with your employment tax deposits going forward and find a payment resolution for back payroll taxes.

The tax professionals at East Coast Tax Consulting Group can help you resolve your payroll tax issues. Call us today at 866-550-7655 to schedule a consultation at our Boca Raton office.

Contact Us 

You deserve the best in IRS tax representation, tax preparation, and tax planning services. At East Coast Tax Consulting Group, you’ll work with a licensed CPA who will handle your case from beginning to end. We invite you to contact our team to schedule a free, confidential consultation.