Independent Contractor Compliance Blog - by Collabrus™

Smart planners see the future and prepare for it before it arrives.

We have a combination of events converging that will eventually result in increased taxes along with tougher enforcement of existing tax laws and tougher IC compliance.  I’ve reported before The Perfect IC Compliance Storm is coming.  Don’t doubt that it is looming on the horizon.  Often people don’t believe anything is significant outside the 24 hour news cycle, but the really important events take longer to develop.  The Perfect IC Compliance Storm is one of those events.

Just to set the stage, consider the following current events:

In California

• Cash is so short that the state controller says to avoid the state government from grinding halt he will be making payments using IOUs unless a budget is passed by July 1.*
• California’s banks haven’t committed to honoring the IOU’s yet.*
• Governor Schwarzenegger is planning to furlough state employees an additional day, for a total of three per month beginning July 1, if lawmakers do not send him an immediate solution for the entire $24 billion budget deficit.*
• The Sacramento Bee reported June 30, 2009 that state employees are scaling back or canceling summer vacations, cutting back on food, entertainment and just about all big expenditures they make, as a result of the furlough days.
• Statewide all Californians are cutting back on spending which has reduced jobs and decreased revenues from state income tax withholding and sales tax collections far below normal levels.

*The California legislature hasn’t passed a budget on time in remembered history.

Regardless what the governor says, it doesn’t take a Tax Rocket Scientist to know California needs to generate additional revenue because the politicians will not cut the full $24 billion from the budget.  That means finding ways to collect more taxes when taxpayers have indicated they don’t want more taxes.  One easy way to collect more taxes is more aggressive enforcement of current tax laws.

Nationally

1. The Wall Street Journal predicts (June 30, 2009) that Washington’s focus in the area of economic and domestic policy will be shifting. The prediction is based on subdued spending and weak national growth, plus an estimated average federal deficit of $1 trillion annually over the next 10 years. The Journal predicts the president and congress will be forced to shift their priority to:  a) increased taxes, b) reduced spending, and c) increased tax law enforcement
2. May 2009, IRS Commissioner Douglas Shulman told Congress he is placing more importance on greater enforcement as a method of closing the “tax gap.” He stated he will use the increased IRS funding he received this year to hire 4,500 new revenue agents.
3. IRS Deputy Commissioner Linda Stiff noted that these new agents are the “largest hiring initiative” (for the IRS) in recent years.
4. The new IRS accountants, economists, statisticians and revenue agents are part of an ongoing federal effort to close the tax gap by accelerated income tax collections and increased enforcement of existing tax laws, including stronger enforcement of IC compliance.

Prepare for The Perfect IC Compliance Storm now

When you know a storm is approaching it makes sense to insure you are protected.  Waiting until after the storm hits you and then spending money repairing the damage is not good business.