IRS Will Send Letter to Taxpayers Before Making Phone Contact for Federal Tax Deposit Alerts

In SBSE Memo SBSE-05-0716-0035 the IRS announced a change in procedure related to contacting taxpayers for federal tax deposit (FTD) alerts. Now the IRS will not make phone contact on the matter until a notice of alert is mailed to the affected taxpayer that they will be contacted by phone by the IRS within 15 days.

Fraudulent calls from individuals claiming to be from the IRS has become a major problem, making it very difficult for taxpayers to recognize legitimate phone contacts from the IRS. Unfortunately, one of the reasons why the frauds are effective is because the IRS has resorted to phone contact of taxpayers in the past as initial contacts in certain situations.

Slowly the agency is beginning to recognize that continuing this practice represents a problem, since taxpayers can’t simply be told the IRS won’t contact them by phone without first having contacted the taxpayer otherwise. This change represents the second such change to procedures in 2016 by the IRS to eliminate a first contact via phone, after earlier eliminating the practice of making initial exam contact by phone.

The memorandum, which was effective immediately upon publication, provides:

Field contact is the preferred method of contact on assigned FTD Alerts. However, Revenue Officers retain the discretion to determine the best method of effective initial contact on a case-by-case basis. Effective immediately, all anticipated telephone initial contacts on FTD Alert taxpayers can proceed AFTER a notice is sent to the taxpayer informing them that a Revenue Officer (RO) will contact them by phone within 15­calendar days of receipt of the FTD Alert.

The “Quick Alert” the ROs will send is described as follows in the memorandum:

The "Quick Note" should include the following information: (RO's can cut/paste this verbiage directly into the quick note).

Dear [Taxpayer Name]:

We noticed a decrease in your current quarter federal tax deposits (FTD) and are contacting you to ensure you are meeting your deposit requirements. We are sending you this notice to inform you that a Revenue Officer will either call you or visit your place of business to discuss these discrepancies.

Your responsibility as an employer

Trust fund tax is money an employer withholds from employees' wages for income tax and FICA (social security and Medicare tax). As the employer, you must withhold trust fund taxes from employees' wages. These taxes are held in trust until paid to the Department of the Treasury by making periodic federal tax deposits.

Penalty for failing to deposit timely

If the taxes are not deposited as required, we may assess penalties of up to 10 percent of the amount not deposited, depending on the number of days the federal tax deposits are late. If the taxes are still unpaid when Form 941, Employer's QUARTERLY Federal Tax Return, is filed, we will assess interest and penalties on any unpaid balance. The percentage may rise to 15 percent for amounts still unpaid after the date of the first notice asking for payment.

While the example “quick note” also notes that a Revenue Officer might visit the taxpayer, the memorandum indicates that the quick note is not required prior to such a visit.

The note also indicates that the notice will go to a representative if there is a valid Form 2848, Power of Attorney and Declaration of Representative or Form 8821, Tax Information Authorization on file for the taxpayer in question.

The IRS does plan to incorporate the guidance found in the memorandum into the Internal Revenue Manual at IRM 5.7.1, Trust Fund Compliance—FTD Alerts, within one year.