With the recent surge in IRS enforcement, small businesses have become a major target for the government. The staggering annual $345 billion tax gap can be largely attributed to small business tax evasion; much of this has been because small businesses are difficult to enforce and many can manage to slip through the tax cracks by underreporting actual income.

Therefore, the IRS has shifted into high gears to catch and penalize small business owners for unpaid taxes–especially for delinquent payroll taxes. While in the grand scheme of things, it may be sensible for the government to close down on the tax gap, the trouble with the new tax collection trend is that many small businesses are actually struggling in this grimy economy and not deliberately trying to evade taxes. Oftentimes what may superficially appear to be blatant tax evasion may simply be a small business owner trying to pay the electric bills by tapping into his/her payroll tax fund.

Considering how vital small businesses are to the American economy, it is surprising how harshly the IRS plans on going after them. According to the Small Business Administration, small businesses:

* Represent 99.7 percent of employer firms.
* Employ about half of all private sector employees.
* Pay nearly 45 percent of total U.S. private payroll.
* Have generated 60 to 80 percent of net new jobs annually over the last decade.
* Create more than half of nonfarm private gross domestic product (GDP).
* Hire 40 percent of high tech workers (such as scientists, engineers and computer workers).
* Are 52 percent home-based and two percent franchises.
* Made up 97.3 percent of all identified exporters and produced 28.9 percent of the known export value in FY 2006.
* Produce 13 times more patents per employee than large patenting firms; these patents are twice as likely as large firm patents to be among the one percent most cited.

Source: U.S. Dept. of Commerce, Bureau of the Census and International Trade Administration; Advocacy-funded research by Kathryn Kobe, 2007 (www.sba.gov/advo/research/rs299tot.pdf) and CHI Research, 2003 (www.sba.gov/advo/research/rs225tot.pdf); Federal Procurement Data System; U.S. Dept. of Labor, Bureau of Labor Statistics

For business owners who have found themselves in IRS trouble, it is important to know that the IRS considers you to be guilty until proven innocent. This means the burden of proof is on you as the taxpayer to show the IRS that there was an excusable cause for your delinquent taxes.  The “guilty till proven innocent” motto is troublesome because for business owners who fail to provide convincing proof, the IRS has unyielding power and authority to collect unpaid payroll taxes–even if it means padlocking front doors and shutting a business down completely.

This is why it is very important to seek tax help from a professional tax attorney in order to fight your battle with the IRS. Oftentimes, a tax attorney’s expertise can make the difference between a business’s survival (with IRS penalty abatement) and a business gone dry from severe IRS penalties.

Read more tips on how to prevent your business from getting into IRS payroll trouble.

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Cracking Down on Businesses with Payroll Taxes Problems: New Economic Stimulus Plan Calls for Heightened IRS Enforcement

How A Business Owner Owed $7 Million in Payroll Tax Debt - But Enlisted Expert Tax Help and Paid Nothing to the IRS!

Small Business Beware - Expect Greater IRS Enforcement as the Agency Cracks Down on Income and Payroll Tax Problems

With IRS Audits on the Rise, Knowing How to Avoid or Resolve a Tax Audit Could Save You Money and Protect the Future of Your Business

Tax Resolution Services is a nationwide professional tax solution company with a team of tax attorneys and IRS specialists who can help you find tax relief.  Free tax consultation - sign up on our website or call us at 866-IRS-PROBLEMS (866-477-7762).

More Tax Help, IRS News and Tax Relief Tips:

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This entry was posted on Wednesday, August 19th, 2009 at 6:00 am and is filed under Expert Help From Tax Attorney, IRS help, Penalty Abatement, Tax Relief News, Tax Resolution Options and Alternatives, Tax news and tips, Taxpayer Rights. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.