Tax Scofflaws Run Up the Tab

Small-business advocates have been lobbying furiously for tax relief in the upcoming federal budget, but it turns out that a lot of small fry are fighting back by simply not paying.

A new report by the General Accounting Office says that nearly 2 million businesses owe $49 billion in back payroll taxes and penalties. That represents about 22% of the total outstanding unpaid tax assessments owed to the Internal Revenue Service.

According to the GAO report, most of these payroll tax scofflaws are small, closely held businesses, the most common of which are construction firms and restaurants. But they also include businesses running the gamut from computer software companies to child-care centers. About 13% of these business owners have stiffed Uncle Sam for payroll taxes at more than one enterprise.

The GAO expressed concern that the unpaid sums strain the Social Security and Medicare systems that payroll taxes support. It recommended the IRS tighten its early detection system to snag delinquent business owners before they can accumulate huge back tax bills.

As it stands, the GAO figures the IRS won’t collect much of that $49 billion because many of the businesses are insolvent, defunct or otherwise unable to pay.

You can download a copy of the report from the GAO Web site at https://www.gao.gov/daybook/990802.htm.

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Marla Dickerson can be reached at marla.dickerson@latimes.com.