When a business experiences financial difficulties it often stops making federal tax deposits and stops filing tax returns.
Federal tax deposits represent the money that an employer withholds from an employees’ pay and turns over to the IRS along with employer-matching contributions. When a business is in trouble, it often inappropriately diverts the money withheld from the employees’ pay to keep the doors open.
Using this tactic, businesses previously often got away with not paying employment taxes for quite a while before the IRS caught on, often for many years. This tactic also robbed the government of the taxes that the business should have paid on behalf of the employees as well as endangering the future viability of the business.
This problem is about to change. The IRS recently announced an early interaction initiative that promises quicker contact with taxpayers. By the end of this year, the Electronic Federal Tax Payment System (EFTPS) will know whether an employer has missed a federal tax deposit within 48 to 72 hours.
The EFTPS system will alert an IRS employee who will then either call or visit the business regarding the missed federal tax deposit. This system, when implemented, should help businesses to quickly correct tax problems and alert the IRS about noncompliant businesses.
Does your business have unfiled tax returns or unpaid liability? Contact us, we can help.
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