It is no secret that the economy is recovering from a major slump. Small business owners as well as individuals have felt the pocketbook pinch. When it comes to taxes however, a slow economy is no excuse for non-payment of taxes according to either the Internal Revenue Service or the Minnesota Department of Revenue.
Our Minnesota readers are no doubt aware that the Internal Revenue Service is looking for money. The agency is looking to collect uncollected taxes, trying to find and stop tax fraud, conducting audits and offering amnesty for those with offshore bank accounts. The IRS also has a whistleblower program with millions ready to give to those with the right kind of information.
Small businesses can be incorporated or unincorporated. A bar or nightclub could operate as a C corporation, S corporation, Limited Liability Partnership or sole proprietorship. Even so, there are certain types of taxes that must be paid, no matter whether or not the business is incorporated. Failure to pay taxes can land someone in a lot of trouble. One only needs to recall that Al Capone spent his last years in jail not for murder, but for tax evasion.
Minnesota Vikings fans will recall that Michael Bennett was our first round draft pick in 2001. He came to us from the University of Wisconsin where he completed a record-setting 40-yard dash in 4.13 seconds. His first year with the Vikings he replaced Roger Smith. His second year with the Vikings he rushed for 1,296 yards and caught 351 receptions for a trip to the Pro Bowl.
Normally when one thinks of tax fraud, one thinks of big crooked deals cooked up by shady characters. One doesn't think of a 52-year-old woman in Duluth misstating her income by less than $7,000 over four separate tax years.
When many of us get our tax refund from the Minnesota Department of Revenue we may pay a few bills, put it in the bank, or splurge a little. A 51-year-old Duluth businessman allegedly took the splurge route -- not by a little -- but "buy" a lot.
The more complicated a business transaction and business becomes, the more complicated the tax calculations are likely to become. This is a very good reason to consult with tax and legal professionals at tax time and throughout the year.
The Internal Revenue Service has more than one problem. Noncompliance, scofflaws, tax evasion, plus plain vanilla tax errors found during random audits of Minnesota taxpayers are just a few of the issues with which the IRS is dealing.