What This Letter Means

Letter 903, You Haven't Deposited Federal Employment Taxes, is one of the most serious letters a business can get from IRS Collection. A revenue officer sends it to an employer that keeps falling behind on payroll tax deposits, often while running up new quarters of unpaid tax. The IRS calls that pyramiding.

The IRS uses this letter in the most serious cases of noncompliance, usually after levies and other collection tools have failed or would be pointless. Revenue officers hand-deliver it with Notice 931, Deposit Requirements for Employment Taxes, or send it by certified mail. A group manager must approve it.

Why It Matters

The IRS must issue Letter 903 before it can recommend a business for a civil injunction or criminal prosecution. A civil injunction under IRC 7402(a) is a federal court order that can force you to stay current on payroll taxes. The letter puts you on notice of those consequences.

The revenue officer will tell you that failure to comply may result in:

  • Prompt assessment of unpaid liabilities.
  • Returns prepared by the IRS for you.
  • A civil or criminal referral.

Your account is also flagged. Any later missed deposit or late return is sent straight to the field for prompt enforcement.

Letter 903 sometimes comes with Letter 1058, a final notice of intent to levy. That letter gives you 30 days to request a Collection Due Process hearing.

What to Do

  • Make every payroll tax deposit on time, starting with the next one. Current compliance comes first.
  • File every employment tax return on time.
  • Don't use withheld employee taxes to pay other bills.
  • Expect the trust fund recovery penalty process. Owners and others responsible for paying the taxes can be held personally liable.
  • Talk to a tax attorney before your next meeting with the revenue officer. Criminal exposure changes how you handle every conversation.

If a revenue officer handed you Letter 903, call us at (813) 229-7100. Payroll tax cases move fast once this letter is issued.