IRS: Earlier Employer Contact May Reduce Delinquencies

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By Howard Perlman

The IRS is seeking to reduce payroll tax deposit noncompliance through an initiative that involves proactively contacting employers in danger of delinquency before penalties increase, a tax enforcement director said May 6.

Algorithms and other data tools that the Internal Revenue Service has been using as part of the Early Interaction Initiative have allowed the agency to detect potential problems earlier, said Darren John Guillot, director of field collection operations for the Internal Revenue Service. The tools help identify which employers have not deposited payroll tax in a quarter, have been depositing far less than in previous quarters or have deposited taxes far less frequently.

Early communications with employers could reduce compliance costs and the amount of time employers need to be in contact with revenue officers regarding penalty assessments because of severe noncompliance, Guillot said at the American Bar Association Section of Taxation's May meeting in Washington.

Under the initiative, the IRS also is using its data to identify employers that have a tendency to deposit payroll taxes late, the agency said Dec. 8 in a news release.

IRS representatives generally contact employers identified under the initiative during the fifth, ninth and 13th week of each quarter when payment algorithms or other data tools indicate they have not sufficiently complied.

Revenue officers participating in the initiative have been analyzing the types of tax enforcement contacts, such as in-person field visits, phone calls and letters, that best motivate employers to improve compliance, said Kristen Bailey, director of collection policy at the IRS.

The IRS is monitoring the comparative degrees to which employers have adjusted their compliance based on the types of enforcement contacts they received so that revenue officers may better understand which strategies are most effective, Bailey said.

To contact the reporter on this story: Howard Perlman in Washington at hperlman@bna.com To contact the editor responsible for this story: Michael Trimarchi at mtrimarchi@bna.com.