Federal legislators are scrambling to raise revenues and lower expenses to reduce deficits, and the Internal Revenue Service (IRS) is under considerable pressure to improve tax collections. Employment taxes, including the "nanny taxes", are estimated to be undercollected by $73 -78 Billion per year.
Private economists estimate that fewer than 5% of households who owe “nanny taxes” actually pay them. The IRS is more optimistic when they estimate that 10% of households who owe the tax actually pay it. This tax shortfall – the difference between the tax owed and actually paid – is estimated between $3 – $10 BILLION per year.
That's a lot of uncollected tax revenue, and the IRS has a tax amnesty program to address it!
Employment taxes are the focus of the IRS' Voluntary Worker Classification Settlement Program, which runs through June 30, 2013. This tax amnesty program targets employers who improperly classified employees as independent contractors, allowing them to voluntarily agree to begin treating these workers as employees going forward, while virtually eliminating any liability for past unpaid taxes. As the Wall Street Journal reported, "nanny taxes" are included in this amnesty program.
The IRS commonly links "voluntary disclosure" tax amnesty programs with enhanced enforcement in a "carrot and stick" approach to improving tax collections. The recent program for voluntarily reporting off-shore bank accounts, which 12,000 taxpayers took advantage of, was immediately followed by a 12% increase in audits of high net worth taxpayers.
Employers who are interested in "getting right" with the IRS on their Nanny Tax obligations are encouraged to call the specialists at HomeWork Solutions for a free telephone consultation to discuss your options.