IRS Trap Snare Employers

Another employer business practice check includes independent contractors and small business owners. All employers can look forward to yet another test in the very near future. This news should come as no great surprise to employers and those following the daily business headlines.

A bill signed by President Bush earlier this month and goes into effect in 2011 is expected to generate $98 billion dollars in additional tax revenue over a 10 year period. The premise for the bill is to catch tax cheats utilizing on line payment services to cover up questionable unfair labor practices. Although not all transactions must be reported to the IRS under the new law in fact purchases or payments totaling less than $20,000 and not in scope offers little comfort to small business owners and those identified to mind the store. This new law will place yet another bull's eye on the backs of all employers and potentially add hidden costs for those identified to carry out the orders.
 To catch a tax cheat

Third party payment processors like PayPal recently learned this bill is directed at them and will require additional checks as part of its on-line payment process. The bill comes complete with strict reporting requirements designed to alert the government of transactions inline with the guidelines outlined above. In addition to the actual reporting warm-up exercises prior to the actual payee bout may result in trying times for everyone. First assignment is to verify each Tax ID number for every business owner's transaction. Layered in are next steps in the event the company is unable to verify a number. Instructions are to withhold 28% of the payment until such time the number has been successfully verified. Imagine being on the other end of the phone or the recipients' follow up email.....

Roadblocks designed to catch those who have become adept at mudding the audit trails may suddenly become a trap for enforcers. These employers who tend to lean towards the spirit of the law instead of following the letter of the law diverting suspicion by hiding under an online shield will get over once again. Even when eventually caught in one of these safety checks they may simply chalk it up as just another hazard of doing business