Compliance June 16, 2004

Congressional Proposals Aimed at Payroll Agent Tax Cheats

June 16, 2004 (PLANSPONSOR.com) - Measures pending in the U.S. Senate and the House of Representatives would crack down on payroll agents who lie on client tax records about underpaying their taxes without the client's knowledge.

Reported by

Fred Schneyer

The bill, the Tax Administration Good Government Act ( HR 1528 ), would require payroll services to register with the IRS and arrange for insurance in case they go out of business. It is sponsored on the Senate side by Senator Max Baucus (D-Montana) and in the House by Representative Rob Portman (R-Ohio).

The IRS National Taxpayer Advocate Nina Olson said the bill is the first step in addressing a serious problem for taxpayers.

“If the taxpayer or the IRS is unable to collect withheld taxes from a payroll service company because it is no longer in business or its assets are otherwise unavailable, the Internal Revenue Code continues to hold the taxpayer – and its owners, offices and employees – liable for the unpaid taxes,” Olson said. “The innocent taxpayer is, in fact, forced to pay its payroll taxes twice – once to the noncompliant payroll service and again to the IRS.”