Feds Plan To Dig Deeper Into Small-Biz Financial Records
Carson Stanwood has no problem with the Internal Revenue Service going after tax cheats. The founder of Stanwood & Partners Public Relations, based in Jackson Hole, Wyo., understands that paying their taxes in full puts small-business owners like him at a competitive disadvantage against the corner cutters.
But when contemplating some of the Treasury Department’s recent enforcement proposals – such as vastly expanding the number of Form 1099s he would have to issue and requiring him to verify his independent contractors’ taxpayer IDs with the IRS – Stanwood changes his tune.
“I applaud them going after this until I hear that it’s going to vastly increase my paperwork. I believe it would add 20 to 25 percent to what I pay my bookkeeper – another $6,000 or $7,000 a year – which would suck,” says Stanwood, whose firm took in about $1.5 million last year.
It’s not shocking that the IRS is being pushed to improve its reported collection rate of 86 percent. Faced with a gargantuan deficit and demands to reform the alternative minimum tax – a levy initially aimed at the very wealthy that is now snaring millions of middle-income taxpayers.
Congress and the Bush administration have been looking for cash under the cushions. And they seem to have found some in an IRS report that shows the amount of unpaid taxes (known as the “tax gap”) to be $290 billion a year, of which $109 billion is attributed to underreported business income, largely from small companies.
Photo by djshaw.
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