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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