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Expect Increased Criminal Enforcement of Employment Taxes

By Steven Toscher and Dennis Perez
March 30, 2009

The Assistant Attorney General of the Tax Division of the Department of Justice (DOJ) recently reminded us that, over the next few years, the IRS and Tax Division will count as one of its priorities employment tax abuses. With ever widening budget deficits and economic limitations on raising taxes, the IRS will go in the only direction it can, that is, to mine the “tax gap” ' the difference between the taxes that should have been collected under current law and those that actually are collected.

In 2001, the tax gap was estimated at $345 billion per year. Approximately 17% was attributable to the under-reporting of employment taxes. A more current estimate of the tax gap is expected to be released in the next few months, and the smart money is guessing close to $500 billion, which suggests that there are $75 billion of underpaid employment taxes every year ' a potential source of more revenue without having to raise taxes.

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