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A new government report from the Government Accountability
Office (GAO) revealed that sole proprietors are responsible for a large amount of tax noncompliance. According
to the report, "at least 61% of US sole proprietors underreported their net business income for the 2001 tax
year. The GAO added, "we know who you are, you might as well confess, resistance is futile."
Yes, that last part is a little joke as not only does the IRS not know who the perpetrators are for the most part,
it's likely a decent percentage of the offenders don't know who they are either. Therein lies some of the problem.
While it's undeniable that plenty of miscreants intentionally underreport income, other factors such as tax-law
complexity, honest errors, poor recordkeeping, and a failure to read "Taxing Details" plague the average
sole proprietor.
Time will tell, what, if any changes come to pass. It's tricky auditing a group that comprises 72% of all businesses
in the US, but less than 5% of all business receipts. Others may be skeptical, but we've got complete confidence
that the IRS can get the job done by inflating the federal bureaucracy, intimidating business owners, imposing
large reporting costs, and infusing new levels of complexity into the tax code.
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