Why Is the IRS Requesting a Phone Call With Letter 5857?

Letter 5857 means the IRS wants to talk with you on the phone due to concerns about your payroll taxes. The IRS typically sends this letter if they are unable to meet with you at your place of business. The letter doesn't necessarily mean that you're in trouble - it just means that the IRS has noticed potential problems with your payroll tax returns or deposits. 

Do not ignore this letter - be prepared for the phone call, or contact the IRS as soon as possible to reschedule the call. Although the IRS no longer makes unannounced house calls to individual taxpayers, revenue officers will absolutely show up at your business if there are payroll tax issues. 

Key takeaways

• Letter 5857 - The IRS wants to schedule a phone call about your unpaid taxes.
• When it comes - After you've missed payroll deposits or paid less than usual. 
• How to respond - Be available for the scheduled call or contact the IRS to reschedule.
• What if you ignore the notice - The IRS will add penalties to your account and may start involuntary collections against your business for the unpaid taxes.
• Additional consequences - The IRS may assess a trust fund penalty against individuals responsible for the unpaid tax.

What Is IRS Letter 5857?

This letter is a request to set up a phone call with the IRS. The IRS sends this letter to businesses after their accounts have been flagged by the Federal Tax Deposit (FTD) alert program. 

This letter is generally not the first step in the process. In most cases, the FTD generates an alert. Then, an account manager assigns the account to a revenue officer. The revenue officer has 15 days to make contact with the taxpayer. Generally, they start by paying a visit to the business - if the owner is not there, they leave Letter 5664 (FTD Alert Field Contact Letter). 

However, if the revenue officer cannot reach the taxpayer at their business or if it's impractical to pay a visit to the business for any reason, the revenue officer will request a phone call with Letter 5857.

Roadmap to Letter 5857

Unpaid payroll taxes can lead to significant business problems and to penalty assessments against individuals involved in the company. Here's an overview of what happens before the IRS sends Letter 5857, followed by what happens if you don't reach a resolution after receiving this notice:

• Payroll Tax Issue: Business fails to deposit 941/940 taxes
• Federal Tax Deposit (FTD) Alert: IRS computers flag payroll account
• Revenue Officer Assignment: RO investigates payroll returns and payments
• Field Visit: RO pays an in-person visit to the business
• Letter 5664: FTD Alert Field Contact Letter left if owner not present for RO's visit
• Letter 5857: RO requests a phone call
• RO Works FTD Alert Case: RO works with the taxpayer to get back into compliance
• Notice 784: Could you be Personally Liable for Certain Unpaid Federal Taxes?
• Delinquent accounts: Assigned to Integrated Collection System (ICS) 
• TFRP Investigation: IRS looks for a responsible person for TFRP
• Form 4181: Used to investigate payroll practices at the business
• Form 4180 Interviews: IRS interviews potential responsible parties
• Letter 1153: Proposed TFRP Assessment
• Appeal or consent: Protest or use Form 2751 to consent to the penalty
• Assessment or resolution: The IRS assesses the tax or agrees not to assess it

Why Did You Receive IRS Letter 5857?

The IRS sends this letter when a revenue officer has been assigned to your case due to issues with your payroll tax deposits. Generally, the revenue officer tries to reach you in person first by making a field call (aka by showing up at your business). If that doesn't work, they use this letter to request a phone call. 

Revenue officers are assigned when the Federal Tax Deposit (FTD) system flags your account. That typically happens to: 

• Semiweekly depositors who haven't made deposits in the current quarter.
• Semi-weekly depositors who have made lower-than-usual deposits in the current quarter.

The system looks for compliance history and deposit patterns that are the least likely to self-correct. Then, the FTD alert system assigns a priority code to each case as follows:

• A potential pyramider - a business owner who repeatedly opens and closes businesses to avoid paying payroll taxes. 
• B potential non-compliance - business owner likely to owe payroll taxes.
• X potentially at risk - The taxpayer appears to be at risk of falling behind.

In most cases, you will not know which priority code is assigned to your case. But it can be helpful to understand what the IRS is looking for. 

How to Respond to Letter 5857

Call the IRS at the number on the letter to confirm the phone call time or to reschedule. If you ignore this letter, the IRS will continue the investigation process and, if applicable, assess penalties and start involuntary collections. 

What to Expect from the IRS Call

During the phone call, the revenue officer will attempt to learn about your payroll tax procedures and why you're having payment issues. You'll get a chance to explain why you haven't been making deposits or why they're lower than usual. 

The revenue officer may ask:

• Are you current with federal tax deposits?
• If so, why have your deposits decreased?
• Is your business seasonal, and if so, is that your your deposit amounts changed?
• Are the business owners or corporate officers in compliance with tax laws?
• Do you or the business have a history of non-compliance?

The revenue officer will try to figure out if you are behind on payroll tax deposits, and if so, why. Then, they'll attempt to get you back into compliance. If that doesn't seem possible, they may have you complete a Form 433-B Collection Information Statement over the phone. The 433-B requests detailed information about the business's revenue, assets, and expenses so that the revenue officer can identify how you'll pay the bill. 

They will also talk with you about the Trust Fund Recovery Penalty and provide you with Notice 784 (Could you be Personally Liable for Certain Unpaid Federal Taxes?) so that you can learn more about this penalty and the risks of unpaid payroll taxes. 

To protect yourself, you may want to hire a tax professional to help you with this process. They can ensure your rights are protected and talk with the revenue officer on your behalf. If you have fallen behind on payroll taxes, they can help you get back into compliance. 

What to Expect After the Phone Call

During the phone call, the revenue officer will attempt to learn more about your situation, and depending on what they learn, they'll either close the file or move it to collections. Here are the potential ways that they may mark your account when they close it:

• Taxpayer in compliance 
• Taxpayer not required to deposit
• Taxpayer is sporadic/seasonal
• Taxpayer brought into compliance 
• Delinquent returns or balance due

If you're in compliance, the case will be closed, and you can continue taking care of payroll as usual. However, if you have delinquent returns and/or tax payments, the collection process will start. And if the business doesn't pay, the IRS will consider assessing the Trust Fund Recovery Penalty against individuals who work in the business or third parties who handle the business's payroll payments. 

TFRP Investigations, Interviews, and Assessments 

If a business doesn't pay payroll taxes, the IRS can assess a TFRP against individuals. The IRS can assess the TFRP against responsible persons who willfully do not pay the taxes. Learn more about what constitutes willful actions for the purposes of TFRP assessment. 

To identify responsible persons, the IRS typically sends Form 4181 to the business to gather information on its payroll processes. Then, the agency uses Form 4180 to interview potential responsible persons. Get tips on how to avoid a TFRP interview.

After identifying responsible parties, the IRS sends Letter 1153 to propose a TFRP. Individuals have 60 days to appeal, or the penalty will be assessed. Then, the agency can levy the individual's wages, bank accounts, or other assets. 

How to Prevent Future Payroll Tax Problems

To avoid getting on the FTD alert system in the future, avoid payroll tax problems with these tips:

• Make sure you understand your deposit schedule.
• Automate tax deposits so that you don't forget to make them. 
• Consider using payroll software that takes taxes out of your bank account at the same time as paychecks for employees.
• If you get behind on payroll taxes, take action immediately - look at how you can adjust your budget to avoid missing any additional payments. 
• Keep accurate records - that can be essential if the FTD alert system flags your account for potential issues. 
• Respond to FTD alerts - if a revenue officer comes to your business or requests a phone call, respond immediately to avoid escalation. 
• Request payment plans if needed - if you get behind on payroll taxes, the IRS will typically let you set up payments if you owe less than $25,000 and can pay off the balance within two years. They'll accept payment plans on larger balances and/or for longer terms on a case-by-case basis.

Use TaxCure to Find Help Now

Have you received Letter 5857? Has the IRS shown up at your business or left Letter 5857? Are you behind on payroll tax returns or deposits? In all cases, you need an experienced tax professional to represent you. When you use TaxCure to search for help, you can narrow down the results so that you only see tax pros who are experienced with payroll tax problems or the Trust Fund Recovery Penalty. 

Don't wait to get help - the IRS takes payroll taxes very seriously. Failure to pay could lead to a potential shutdown of your business or a penalty assessment against you personally. You deserve peace of mind, and the right tax pro can help you achieve that.