Sole Proprietors in the Crosshairs
It looks like the IRS will be looking a lot harder at Schedule C filers (sole proprietors) than in years past.
There is an estimated $300+ billion tax gap - a gap between what Americans should be paying in income tax and the amount they are paying - according to the US Treasury Department. The IRS recently reported to Congress that they thought they could recover over $100 billion of this money by taking a hard look at small business taxes, especially those of Schedule C and S-corporation filers.
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I spent quite a bit of time tracking down the source info on this article, since it was a clip of a clip of a clip I got a few weeks ago, but, finally, I've got the scoop.
For a good idea of what the IRS thinks is wrong, check out the September 2006 Treasury report "A Comprehensive Strategy for Reducing the Tax Gap".
For small businesses and sole proprietors, some of the most relevant quotes about the tax gap and plans to fix it are found on pg 5:
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 underreporting of tax (i.e., by
underreporting income or overstating deductions and credits), with roughly half this
amount (including self-employment tax) attributable to underreporting 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.
***
Wow. I feel targeted. A couple of groups working to make sure the IRS looks hard at everyone, not just small businesses and sole proprietors, are the National Federation of Independent Businesses and U.S. Chamber of Commerce. If you are a member of either group you might want to check with your issues and policy contact to see what you can do.
There is an estimated $300+ billion tax gap - a gap between what Americans should be paying in income tax and the amount they are paying - according to the US Treasury Department. The IRS recently reported to Congress that they thought they could recover over $100 billion of this money by taking a hard look at small business taxes, especially those of Schedule C and S-corporation filers.
~~~
I spent quite a bit of time tracking down the source info on this article, since it was a clip of a clip of a clip I got a few weeks ago, but, finally, I've got the scoop.
For a good idea of what the IRS thinks is wrong, check out the September 2006 Treasury report "A Comprehensive Strategy for Reducing the Tax Gap".
For small businesses and sole proprietors, some of the most relevant quotes about the tax gap and plans to fix it are found on pg 5:
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 underreporting of tax (i.e., by
underreporting income or overstating deductions and credits), with roughly half this
amount (including self-employment tax) attributable to underreporting 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.
***
Wow. I feel targeted. A couple of groups working to make sure the IRS looks hard at everyone, not just small businesses and sole proprietors, are the National Federation of Independent Businesses and U.S. Chamber of Commerce. If you are a member of either group you might want to check with your issues and policy contact to see what you can do.
Labels: Taxes
posted by Dy at 10:45 AM
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