More than 1 million businesses cheat on payroll taxes, Congress says

"More than one million businesses are cheating on their payroll taxes to the tune of $58 billion," reported Sen. Norm Coleman, R-Minn., ranking member of the Senate Homeland Security and Governmental Affairs Permanent Subcommittee on Investigations. The mid-summer subcommittee hearing coincided with the release of a related Government Accountability Office (GAO) report, "Tax Compliance --Businesses Owe Billions in Federal Payroll Taxes." The subcommittee examined the magnitude of unpaid payroll taxes by businesses and the IRS's collection enforcement methods for unpaid payroll taxes.

According to the GAO study, approximately $9 billion (of the $58 billion in unpaid payroll taxes) was in a queue awaiting assignment for collection action. Over 80 percent of payroll tax cases (as of September 2007) in the queue awaiting assignment did not have a lien filed. When a lien is not filed, the federal government's interest in the property of the tax debtor is not protected, Coleman noted. IRS Deputy Commissioner Linda Stiff admitted that the "queue is a weakness in the system. We have to identify actions so that taxes can be assessed and liens can be filed." Stiff agreed that, under certain circumstances, a lien should be automatically filed.

(GAO-08-617)