1/5/2018. Employment. Early Intervention. Future State: Early Interaction. Basic Employer Responsibilities

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1 Employment Taxes: Early Intervention Future State: Early Interaction Proactive interaction with employers who miss employment tax payments to preclude costly, burdensome consequences Assist employers to avoid delinquencies which can quickly pyramid and leave no good options Avoid penalties, injunctions, or prosecutions that imperil viability and prove costly to all effected parties This reality from you, as an advocate, will resonate with employers to preserve their business interests Basic Employer Responsibilities Employment taxes are amounts of income and payroll taxes withheld and matched by employers Employers are required to make Federal Tax Deposits (FTDs), typically quarterly, of the amounts withheld and matched If an employer has a deposit requirement, it must be made electronically and can be made via the Electronic Federal Tax Payment System (EFTPS) Employment taxes are required to be paid timely as they become due to avoid consequences 1

2 Employment Taxes Owed Employment taxes account for more than 70% of all tax collections As of March 31, 2017, employment tax owed but unpaid was $67.5 billion or 15.8% of the total amount of assessed tax that was unpaid Employment taxes owed but not paid is a major contributor to the overall Tax Gap Federal Tax Deposit Alerts Federal Tax Deposit (FTD) Alerts began in 1972 to identify and correct employment tax delinquencies at the earliest possible time Proactive effort to address employment tax compliance Educate employers regarding their filing and payment responsibilities FTD Alerts are issued when it appears an employer is behind in depositing withheld employment taxes From 1972 to 2015 Alerts were issued in week 13 and contacts made in the following weeks 5 Early Interaction: FTD Pilot Early Intervention Pilot ( ) to identify and contact employer when payments are missed but before delinquencies occur Improved algorithm Added predictive variables to better detect employers missing deposits Accelerated timing of alerts Increasing the impact of alerts Identifies employers benefitting most from alert Alternative treatment streams tested Recorded phone messages FTD soft letter notices 6 2

3 Early Intervention Pilot Results Earlier Revenue Officer contact and soft letters have a positive impact on employment tax compliance Increased tax collection Reduced collection costs Reduced taxpayer burden (penalties and interest) Increased understanding of filing and payment requirements 12% Improvement in subsequent timely filing and depositing behavior after taxpayers have been contacted in-person 7 Early Interaction Going Forward IRS is operationalizing the Early Interaction Initiative and will continue to reach out to taxpayers even earlier in the future, as soon as a payment is missed Future enhancements EFTPS Early Alerts Modifies the FTD payment platform to create a near real-time system to identify variances in FTDs that will enable/expand treatment streams Anticipated Implementation: FTD Delinquency Consequences Employers who fail to collect, account for and deposit employment tax due are imposing risks and costs on their employees, business viability, and trust funds Employers who willfully fail to comply with their obligations for their own benefit unlawfully gain an unfair advantage over their compliant competitors For those employers that we cannot reach proactively or who persistently do not resolve their tax issues, the IRS and the Department of Justice have made employment tax enforcement a high priority 9 3

4 Enforcement Penalties Throughout 2016 and to-date in 2017, IRS has made progress in its efforts to timely pursue Trust Fund Recovery Penalties In 2016, Revenue Officers recorded an 80% increase in suits for injunctive relief To date in 2017, Field Collection continues to see a 44% increase in suits for injunctive relief 10 Enforcement Criminal Referrals In FY 2016 and FY 2017, Field Collection has placed particular emphasis on criminal referrals IRS Criminal Investigation and the Department of Justice have made employment tax a priority The following headlines of criminal prosecution cases illustrate that the unlawful failure to fulfill employment tax responsibilities span business types, sizes, localities, and circumstances: 11 Enforcement Prosecutions Missouri Restaurant Owner Sentenced for $566,000 Tax Scheme Trucking Company Owner Sentenced on Employment Tax Charges Tennessee Business Owner Sentenced For Failing to Pay More Than $8 Million in Employment Taxes Former Daycare Owner Sentenced For Failing to Pay $891,000 in Taxes Maryland Business Owner Sentenced for Failing to Pay Over $1.4 Million in Taxes 4

5 Enforcement Prosecutions Accounts Payable Supervisor Who Embezzled Millions Sentenced West Virginia Business Owners Sentenced for Failing to Pay Employment Taxes Oklahoma Man Sentenced for Money Laundering and Failure to Pay Over Employment Tax South Jersey Man Sentenced for Hiring Illegal Immigrants, Failing to Collect Payroll Taxes Men Sentenced, Ordered To Pay Over $6,000,000 Restitution for Tax Fraud at Hope Hospital Partner in Assisting Employers IRS is proactively interacting with employers who miss a deposit or filing requirement to assist them, but we cannot reach everyone and need your help Please join us in assisting your members in understanding and fulfilling their employment tax responsibilities as well as caution them to avoid the costly, burdensome consequences Helping employers is in our mutual best interest Challenges & Priorities Staffing between 2010 and 2017, the number of revenue officers declined from 4,068 to 2,380 (over 40% attrition) Field Personal Impersonation - A three part effort to address this risk is now in place. Future Complex Work, Field Presence, Manager as Coach, RO as SME 5