Several States Cracking Down on Tax Cheats – Small Businesses Likely Target of Increased Tax Compliance Enforcement

I’ve been talking a lot lately about closing the $345 billion tax gap to help us cope with the proposed $700 billion government bailout and growing federal defecit. Today the Associated Press reported that several states are putting more money and personnel into cracking down on tax cheats - large and small – to cut into their growing budget deficits.

Tax collectors are likely to focus their stepped-up enforcement on small businesses, who tend to be the biggest tax evaders, particularly during economic downturns. Warning letters have already gone out to small businesses warning them of the consequences of not collecting or remitting state taxes.

Additional highlight from the article:

California, faced with a $15.2 billion budget deficit, hopes to collect an additional $1.5 billion by doubling the penalties on corporations that are late in paying taxes.

California’s tax collection agencies are getting an additional $226 million to hire more auditors and tax collectors and pay for new enforcement initiatives, including using driver’s license records to find people who should be filing tax returns but aren’t.

In Massachusetts, which is facing a $1.3 billion deficit, officials expect to take in an additional $150 million from new tax-enforcement initiatives, including $60 million as a result of the work of nearly 90 new state workers focusing on compliance and collection.

Massachusetts tax collectors expect to squeeze $30 million more out of some businesses by cracking down on those that improperly classify workers as independent contractors instead of full-time employees to avoid taxes.

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One Response to “Several States Cracking Down on Tax Cheats – Small Businesses Likely Target of Increased Tax Compliance Enforcement”

  1. Jeff Day Says:

    Tax Gap: In several different forums, I have been unable to get the IRS to deny that the IRS wishes to close the gap where it wants to close the gap and ignore the gap where it wants to ignore the gap.

    I believe it is unlawful to take a deduction on a tax return for an illegal payment. Therefore by definition it is unlawful to take a deduction on a tax return for an illegal payment to an illegal immigrant. Therefore if the US Government was as serious about our laws and taxes as it is “political correctness” the tax gap could be closed. All that would be necessary is to disallow as deductions on any tax returns for any/all payments to and relevant to any illegal immigrants.

    Just think how much California would collect if they disallowed any deductions on any state tax return for any payments to any illegal immigrants in the vineyards and various fields. But they aren’t going to do it, not because there is any question on the legalities, but they don’t want to violate the “political correctness” of the democrat party.

    Jeff Day EA
    Evansville, IN

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