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Part 5. Collecting Process

Chapter 7. Trust Fund Compliance

Section 1. FTD Alerts

5.7.1  FTD Alerts

5.7.1.1  (11-19-2010)
Federal Tax Deposit FTD Alerts

  1. FTD Alerts are used to determine an employer’s compliance with employment tax deposit requirements for the quarter of Alert issuance, and for subsequent quarters until the taxpayer is brought into full compliance.

  2. The FTD Alert process identifies, at an early stage (i.e., before the return is due), taxpayers who have fallen behind in their deposits.

5.7.1.2  (11-19-2010)
Criteria for FTD Alert Issuance

  1. FTD Alerts are issued on taxpayers who are classified as semiweekly depositors and who have not made FTDs during the current quarter or who have made them in substantially reduced amounts. They may be identified by the presence of TC 971 AC 046 on a tax module.

  2. There are two levels of Alert issuance, both of which are assigned for field contact. They are identified by the following systemically generated codes:

    • Potential Pyramider, identified by an Alert priority code of " A" . The taxpayer had an unresolved account in notice status in each of the prior two quarters.

    • Potential Noncompliant, identified by an Alert priority code of "B" . The taxpayer is considered to be likely to owe without intervention based on our identification and selection process.

5.7.1.3  (11-19-2010)
Process for Alert Issuance

  1. Master File conducts the analysis cycle for FTD Alerts in the twelfth week of each calendar quarter. This will be in March, June, September, and December.

5.7.1.4  (11-19-2010)
Receipt of FTD Alerts

  1. FTD Alerts are sent directly from Master File to the Integrated Collection System (ICS) for direct assignment to the field.

  2. Contact the taxpayer within 15 calendar days of receipt of the Alert. If timely contact is not possible, notify the group manager. The group manager will decide if reassignment of the Alert is appropriate. If contact is delayed for more than 15 calendar days, note the reason for the delay in the case history.

5.7.1.5  (11-19-2010)
Pre-Contact Research and Analysis

  1. Pre-contact analysis must be conducted on all alerts prior to making a field call. If the pre-contact research and analysis reveal:

    1. the taxpayer is not liable for deposits, close the Alert. Verify final return information is posted on IDRS.

    2. the taxpayer is assigned to ACS, contact ACS. Determine the account’s status. If ACS indicates that the taxpayer is current or no longer liable for employment taxes, close the Alert. If this information is unavailable, work the Alert, request that ACS transfer the account and create bal due modules on ICS.

    3. the taxpayer is in bankruptcy, inform insolvency of the FTD Alert and verify that Insolvency is monitoring the taxpayer’s compliance. Request input of TC 136 and close the Alert. A TC 136 prevents future Alerts from generating. It is reversed with a TC 137.

    4. Upon receipt of the Alert, ensure the case sub code is listed as FTD Alert 105, per IRM 5.2.1.8.1 and 5.2.1.10(2). If the sub code is not listed as 105, immediately update ICS.

  2. Review BMFOLT to verify compliance history, including prior TFRP assessments. Establish the total amount of deposits made in previous quarters to assist in deposit verification during the field call. Additional things to consider as a part of pre-contact analysis but not all inclusive:

    • Review cross compliance

    • Determine if taxpayer previously qualified for the COBRA credit

    • Determine if the taxpayer has a representative

    • Decide what issues to address during the initial contact with the taxpayer

    • Schedule field call within 15 calendar days of receipt

5.7.1.6  (11-19-2010)
Contact Procedures

  1. Follow the procedures in IRM 5.1.10.3.2, Effective Initial Contact.

  2. Explain the reason for the visit. Recognize that Alerts generate based on the probability that the taxpayer has fallen behind in deposit payments.

  3. Provide the taxpayer with Publication 1, Your Rights as a Taxpayer.

  4. If the taxpayer provides documentation or other substantiating information that he or she is in full compliance, verify that the amount deposited is accurate based on previous quarter's deposits. If the amount of the deposits are less than previous quarters, ask additional questions regarding possible reduced payroll or wages and close the Alert.

  5. If the taxpayer is no longer required to deposit (i.e., out-of-business, no employees), ensure there are no other outstanding modules, promptly request input of TC 591 and close the Alert.

  6. If the taxpayer is in compliance and due to sporadic or seasonal payrolls the Alert analysis is unable to predict deposit compliance, request input of TC 136 and close the Alert. During the contact, briefly review Federal Tax Deposit requirements with the taxpayer and provide Notice 931, Deposit Requirements, or other document outlining the deposit rules to help explain the requirements. This may help to ensure the taxpayer remains in compliance.

5.7.1.7  (11-19-2010)
Taxpayer Not in Compliance

  1. FTD Alerts on delinquent taxpayers provide an early opportunity to assist and educate taxpayers before their liability pyramids and the growing debt becomes more difficult to resolve.

  2. Review Federal Tax Deposit requirements with the taxpayer. Give the taxpayer Notice 931, Deposit Requirements for Employment Taxes, Publication 15, Circular E, Employer's Tax Guide, Publication 3151-A, The ABCs of FTDs or other documents outlining the deposit rules to help explain the requirements.

  3. Discuss the cost for failing to deposit taxes on time. Explain the FTD penalty to the taxpayer. Consider illustrating the cost to the taxpayer by showing the taxpayer the penalties incurred in the Alert quarter as well as prior quarters.

  4. Ensure that the taxpayer understands the consequences of continued noncompliance. Discuss levy and seizure provisions, monthly filing, and the special bank deposit provisions found in IRC 7512. Advise the taxpayer that additional information on those deposit provisions in IRC 7512 can be found in Publication 15, Circular E, Employers Tax Guide. When applicable, discuss the provisions for the Trust Fund Recovery Penalty.

  5. Monitor and document the taxpayer’s compliance with deposits for the Alert quarter and subsequent quarters until the account is resolved. If the taxpayer cannot satisfy past due deposits while meeting current deposits, encourage the taxpayer to make current deposits first while working to resolve past due deposits.

  6. After contacting the taxpayer, document the case history to show FTD requirements and assessment of penalties for not depositing on time were discussed with the taxpayer. Also, document that the taxpayer was made aware of the consequences of non-compliance.

  7. If the taxpayer is unable to make the required deposits or remain in compliance, see IRM 5.7.1.8.

5.7.1.8  (11-19-2010)
Working FTD Alerts

  1. If the taxpayer is unable to make the required deposits or become compliant, secure a Collection Information Statement and follow all procedures listed in IRM 5.1.10.3.2, Effective Initial Contact. Request assignment of the case and close the alert.

  2. Explain the Trust Fund Recovery Penalty (TFRP) provisions, provide Notice 784 and make TFRP determination.

  3. Ensure ICS histories are clearly documented. See IRM 5.1.10.6, Case Histories.

  4. Ensure timely follow-ups are met. See IRM 5.1.10.7, Timely Follow-ups.

5.7.1.9  (11-19-2010)
Alert Closing Procedures

  1. Secure the 941 return for the Alert quarter. Use the appropriate closing code with TC 599 for the return secured.

  2. If full payment of tax, penalty, and interest is not received with the return, see IRM 5.7.1.8 and proceed with prompt assessment action.

  3. Close the Alert when the taxpayer is brought into full compliance. Full compliance includes, filing of all tax returns on or before the required due date, unless a valid 1040 extension has been requested; making appropriate tax deposits in the proper amount by the appropriate due date; and paying any tax due with the return at the time the return is filed.

  4. If the taxpayer is not in compliance and there is a Bal Due, or Del Ret open, request assignment of the case and close the alert,

  5. If a Bal Due or Del Ret is received on the FTD module, prior to requesting assignment, the FTD Alert will systemically close and will be assigned to the RO.

  6. The following options are available to close an Alert:

    1. Return Secured: The taxpayer was not in compliance with FTDs, and the revenue officer secured a balance due return for the Alert quarter. The revenue officer should close the FTD Alert, create a pre-assessed or prompt-assessed Bal Due on ICS, and pursue collection.

    2. TP is in Compliance: The taxpayer was required to deposit and was fully current with payment and filing requirements at the time of initial contact on the Alert.

    3. Not Required to Deposit: The taxpayer was not required to deposit for the Alert quarter.

    4. TP is Sporadic/Seasonal: The taxpayer is either a sporadic or seasonal employer with a fluctuating payroll. If the Alert analysis would be unable to predict the taxpayer's deposit compliance, the revenue officer should close the Alert and manually request input of TC 136 to suppress future Alerts.

    5. Brought into Compliance: The revenue officer ensured the taxpayer made all required deposits and secured the return for the Alert quarter. The taxpayer is fully current on the alert and current quarter at the time of closure, and there are no additional balances owed.

    6. Baldue/DelRet Received: The revenue officer received another module by which to control the case. FTD Alerts should be closed when there is an open Bal Due or Del Ret on the account.

  7. If a new FTD Alert is issued while an Alert from a prior quarter is still open in inventory, the old Alert will be closed systemically and replaced with the new Alert.

5.7.1.10  (11-19-2010)
Transfer of FTD Alerts

  1. If the taxpayer is in another area, the FTD Alert can be transferred without a prior Courtesy Investigation.

  2. Due to the time-sensitive nature of FTD Alert contacts, call and advise the receiving office of the transfer.

  3. Transfer FTD Alerts only if the business itself, not merely one or more officers or partners, is located in the transferee area.


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