IRS To Put Spotlight On Employment Taxes

Here’s what might be interpreted as a bit of good news: even as our country’s debt is growing ever greater, the IRS is trying hard to collect the money people owe it.  This fact could be seen as a bad thing too, though, and small business owners in particular will want to make sure it doesn’t come back to bite them.

We’re not accusing anybody of committing crimes, of course; just consider this a heads up to be careful about making mistakes.  In a National Federation of Independent Business press release, Elizabeth Milito explains, "The head of the U.S. Justice Department’s Tax Division has warned a group of tax attorneys that the IRS and DOJ will aggressively pursue unpaid employment taxes."

So, if time and/or your checkbook allow, maybe run the numbers twice this year or have your accountant do the same.  An audit is the last thing anybody needs.

As for what exactly the IRS is suspicious about – maybe you can pencil in on the tax return "we’re not doing this" – one practice is paying employees in cash.  Another involves classifying them as independent contractors instead of people who work for a firm.  Milito also warns, "Don’t be fooled into believing that an interpretation of the tax code allows an employer to avoid withholding employment taxes."

Stay sharp, then, and hopefully the IRS will be able to make a dent in the national debt without causing you any trouble.