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$58 billion in payroll taxes owed: report

Posted July 29, 2008 11:08 AM
The Swamp

by Frank James

There are apparently a lot of deadbeat businesses out there when it comes to paying their payroll taxes.

The General Accountability Office, Congress's investigative arm, estimates that the federal treasury is short $58 billion in unpaid payroll taxes.

Part of the problem is that there are a lot of payroll-tax scofflaws out there, the GAO determined following an audit of the Internal Revenue Service database.

As of September 30, 2007, IRS's records showed that over 1.6 million businesses owed over $58 billion in unpaid payroll taxes, including interest and penalties. Of that amount, 70 percent of all unpaid payroll taxes are owed by businesses with more than a year (4 tax quarters) of unpaid federal payroll taxes, and over a quarter of unpaid payroll taxes were owed by businesses that accumulated tax debt for more than 3 years (12 tax quarters).

And some of these business owners are pretty shameless, as the GAO found:

Our analysis of those businesses showed some owners/officers abuse the tax system, willfully diverting amounts withheld from their employees' salaries to fund their business operations or their own personal lifestyle. For example, the owner of one of our case study businesses that owed almost $2.5 million was under-reporting their personal income and was involved in possible check kiting and money laundering. Another had accumulated almost $2.5 million in unpaid payroll taxes and made large cash withdrawals prior to filing bankruptcy multiple times. A third had accumulated over $500,000 in unpaid payroll taxes over a 10-year period as well as another $500,000 in personal taxes. The owner had put property in a spouse's name and sold property to children for less than market value to avoid IRS collection action.

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