ARE YOU PAYING SOMEONE ELSES TAXES ?

Have you seen the news lately?According to the Us Treasury, Business are creating a huge tax gap, and it has been going on for year's. This means they owe the taxes but they are just not voluntarily paying, and in most cases not reporting the tax. The same business are reporting great gains to their investment boards and share holders. They do this in order to keep investment money, and lines of credit flowing into the company.

"There are three key characteristics of the tax gap:
• Over 70 percent of the gross tax gap is attributable to the individual income tax,
which is the largest single source of Federal receipts.
• Over 80 percent of the gross tax gap is caused by under reporting of tax (i.e., by
under reporting income or overstating deductions and credits), with roughly half this
amount (including self-employment tax) attributable to under reporting of net business
income by individuals. Eighteen percent of the gross tax gap is attributable to
underpayments of taxes or failure to file tax returns.
• Noncompliance is highest among taxpayers whose income is not subject to third party
information reporting or withholding requirements.
These characteristics suggest a targeted response designed to address the most significant
areas of noncompliance. The following overview discusses these characteristics
As indicated above, the IRS estimates that over 70 percent of the gross tax gap is
attributable to the individual income tax. "

"Moreover, while it may be possible to develop a comprehensive strategy that reduces the
tax gap, it is not possible to implement a policy that would come close to eliminating the
tax gap without an unacceptable change in the fundamental nature of our tax compliance system"

Tax Gap Strategy Timeline for Fiscal Year 2007

January
• Taxpayer Advocate’s Annual Report to Congress
• Update of 2006-2007 Treasury Department/IRS Priority Guidance Plan
• Launch of Federal/State Electronic Federal Tax Payment System (EFTPS).
• Deliver Taxpayer Assistance Blueprint Phase II Report to Congress

February
• Administration’s fiscal year 2008 budget request, including anticipated legislative proposals for compliance initiatives, tax code simplification and IRS funding

March/April
• Detailed outline of IRS tax gap strategy reflecting provisions in Administration’s fiscal year 2008 budget request
o Outline steps to reduce opportunities for evasion
o Outline IRS research initiatives
o Outline IRS information technology initiatives
o Outline IRS compliance initiatives
o Outline IRS taxpayer service initiatives
o Outline steps to reform and simplify the tax law

May
• Stakeholder meetings to discuss Administration’s fiscal year2008 budget request

June
• Treasury Department review of practitioner compliance initiatives

July
• 2007-2008 Treasury Department/IRS Priority Guidance Plan.

The IRS and US TREASURY are committed to flushing out these companies. Revenue Officers are getting tougher on compliance and enforcement trying to make examples out of the business they are able to get now. My advice as a Tax Consultant in a prominent firm is to seek legal representation NOW

Thats not your money!

The IRS takes the civil trust fund very seriously. If you own a business, you know exactly what the civil trust fund is. When you pay employees, the IRS "trusts" you to collect their withholding and FICA taxes. At that point, you have to give that money to the IRS and file a form 941 to reconcile what you have paid the IRS.

What happens a lot of times is a business will get into a cash crunch and not pay their civil trust fund deposits to pay other bills instead. They think they can catch up with it the next month and when that doesn't happen, the next. Slowly they realize that they are now behind 3 months and have not filed their form 941. The IRS sees this as stealing. This is not unpaid taxes of the business; instead, it is other people's money that was intended to pay their own taxes, medicare and social security retirement. It must be paid back and in full. The IRS does not negotiate on this type of liability.

This potentially places a business in great jeopardy. By not paying and/or filing for 3 months, they have earned themselves a Revenue Officer, the highest level of collections enforcement the IRS has. It is the Revenue Officer's job to collect the civil trust fund money. They will levy a business to collect the money. They can levy bank accounts and accounts receivables. They can even shut down a business to collect the civil trust fund.

It does not have to be the end of the road for your business. There are ways of handling this situation with the IRS. You need professional representation to help you navigate through these kinds of rough waters. There is help if you want it!