The Internal Revenue Service is not particularly friendly toward small businesses. Year after year, the IRS accuses small business of cheating their way out of millions of dollars in taxes. Small business owners in California, however, know how complicated it is to file a tax return, and the IRS is unforgiving when mistakes are made. Now, tax collectors are utilizing new resources to make things even more difficult for business owners.
In an effort to increase Tax Code compliance, states are getting creative with their collection techniques. For example, California has partnered up with New York to cross-check those who might owe taxes in the other state. If someone gets a refund in New York but owes money in California, the refund will be applied to the California debt.
Some states are starting to take advantage of data from places like the Department of Highway Safety and LexisNexis to make sure taxpayers are reporting accurate information. Other states are refusing to renew licenses or issue permits for businesses that have not paid their taxes in full. Finally, in some states, jail time is a real possibility for business owners who are delinquent on their tax payments.
No California business owner wants to end up in jail because of unpaid taxes. As the state begins to crack down on delinquent business owners, it is becoming increasingly important to ensure that all of your tax-related documents are filled out correctly and in full. One slip-up could mean devastating penalties. California has announced that it is investing $670 million in new technology related to tax collection. To ensure that your business does not get targeted, it may be worthwhile to talk to an attorney about your taxes.
Source: Bloomberg Businessweek, “How States Are Cracking Down on Small Business Tax Cheats,” Patrick Clark, March 11, 2014