<p>This is not a political thread. This is a question I have about what you expect the government to do in a certain instance. What should the government do when a business does not turn over the trust fund taxes it collects (sales tax) from their customers or withholds (income tax) from their employees. This is not a question about whether taxes are too high or some person lost his job so he can not pay his income tax. It is a question about what you think the government should do when a business collects money from other people and for whatever reason does not turn it in to the government. Should the reason matter?</p>
<p>For this discussion criminal prosecution is off the table. This discussion should be about civil collection only.</p>
<p>Maine- you do not have enough jail cells or prosecutors or courts in the country to deal with the number of businesses that do this in one county of one State to deal with this as a criminal issue.</p>
<p>“What should the government do when a business does not turn over the trust fund taxes it collects (sales tax) from their customers or withholds (income tax) from their employees” </p>
<p>Good Grief! The IRS and state board of Equalization [which handles sales tax collection] of the state the business is located in, will come after them as soon as they find out, that’s what! This kind of financial stupidity will result in expensive, time consuming audits, liens being filed against bank accounts and properties owned by the business, bank , savings and any and all accounts being drained by the IRS or Board of equalization to pay the owed back taxes, huge financial penalties can be levied, and jail time is a possibility.
It IS against the law [both Federal and state] to not forward any and all taxes that are collected to the regulating agencies . Duh.</p>
<p>hayden- nothing is going on but I wonder if people are really ready for the government to close hundreds of businesses every month for not paying their taxes.</p>
<p>menloparkmom- I do this for a living. We do everything you say. We also have a private collection firm that works thousands of tax collection cases and when they are not paid they file judgments and send the cases to my staff to collect. I have a staff of 150 people each of them have about 80 cases and there are about 9000 cases backlogged and not yet assigned. Last year we collected $300 million. I would bet California is significantly worse. In fact NJ had the most aggressive collection program in the country for many years and our enforcement (closing down businesses) dwarfs that of the IRS in NJ.</p>
<p>My question is what do you believe the stance should be with these businesses that have fallen behind. What opportunity do should they get to resolve this? How many business closures by the government do you think the public would stand? Do you think that the public would understand that closing a massive number businesses may actually be better overall for the economy than continuing to allow them to collect the taxes and not send it to the government?</p>
<p>Aren’t there already penalties of some kind if a business fails to turn over the funds? There should be and it can be used as a means of encouraging the company to turn it over in a timely manner. </p>
<p>Some of the cases could be criminal as well if the business owners are purposely keeping the funds, basically theft, in which case they s/b criminally prosecuted and go to jail.</p>
<p>Gladgrad- there are significant penalties, there is interest and there are other fees that are charged but businesses still do not turn over the money. Some cases are criminal but the vast majority are handled as civil collection matters. The strongest most effective method to stop a business from collecting tax and not sending it to the State is to seize the business. While you may not recoup what is owed you stop the business from collecting more funds and not turning those funds in. Do you think the public is prepared for 100,200,300,400 businesses to be closed every month for not paying trust fund taxes?</p>
I don’t know but maybe it makes sense to shut down the companies that simply refuse to pay and are basically stealing the money that’s not theirs to begin with. If more and more of these companies were shut down then just like penalties but with a much stronger statement, it may encourage other companies to tow the line and pay up. If they’re running their business that poorly that they’re not turning over the sales tax money I gave them in good faith then they should be shut down and I don’t think I’d miss them.</p>
<p>PS Failing to pay trust funds and payroll taxes is horrendous. The fact that the government seemingly has failed to develop avoidance mechanisms for such abuses speaks volume about the efficiency of the government and its staff.</p>
<p>sewhappy- it is not their taxes they are getting away with not paying. They are taking money from someone and keeping it. It effect they are gaining an advantage over the business that does what they are supposed to do. </p>
<p>So xiggi what is your experience with tax collectors in the northeast?</p>
<p>GladGrad- it many ways it does make sense to shut them down especially in instances where they continue to collect the tax and fail to remit what they took in. I will use the example of a pizzeria. Lets say a town has 7 pizzerias and 4 of them pay all of the taxes they owe each month but 3 of them do not. I believe the government should advise those 3 businesses that we will work with them to get the back taxes paid however an absolute condition is that from this day forward they must pay the taxes they owe every month and fall no further behind. Now the question is what should happen to them if they do not meet that absolute condition. If the State closes those 3 businesses down is that necessarily bad? Do people stop eating pizza or do they now shop at the 4 pizzerias left open? If they do shop at those business that have played by the rules then those businesses earn more money with the increased sales. The fact that there are no 3 vacant pizzerias may also keep there expenses down since those vacancies may limit the ability for the landlord to increase the rent charged. So my question is really do many of you here but especially those who own and operate businesses believe the State should work with businesses that fall behind on taxes. Would you agree that even if we work with those that fall behind we should have an absolute rule that from our point of contact there can be no additional failure to pay the current taxes. Or do you agree with sewhappy and like the notion that businesses can get away with not paying taxes?</p>
<p>Except for the tidbits gleaned from a few posts on this forum, the answer is none. </p>
<p>If you really were expecting a serious answer (even rhetorical) about what the government should do by posting on a public forum, I apologize. I would think that entities and agencies that possess superpowers in collecting and discharging debts would have mastered the art of getting their just desserts. </p>
<p>Jean-Baptiste Colbert must be turning in his grave. :)</p>
<p>Actually I was wondering what the perception is from people that do not deal with the issue on a daily basis they do however deal with a local business person. That person they may really like and be fond off but they also may not be turning in tax money. If the State closed that business how would they feel. You see xiggi public perception matters because even when you do the correct thing if mass public opinion is against your action you have to deal with that issue also.</p>
<p>We have mastered the art as you say. I just wonder if the public is ready for it to be implemented more vigorously than ever before?</p>
<p>You’re also tossing a lot of people out of work if you seize and close the business. You could try to sell it (might not be possible in the current economy) or just sell the assets but then you lose the people collecting paychecks spending in the community.</p>
<p>What do you do if they’re taking the withholdings to make payroll?</p>
<p>You can’t really come to an agreement where they will guarantee that they will pay taxes - because they may not be able to. What if you don’t have enough or any customers for a while? What if you have no income or profit or cash?</p>
<p>One solution on withholding taxes: give all of the money to the employee and make them responsible for paying taxes. That way the employee knows whether the employer is stiffing them or not. It moves the withholding (btw, I don’t think that we should do the withholding thing anyways) responsibility to the employee but at least they have the cash in hand to pay the withholdings whereas an employer might not.</p>
<p>BC- should we work with them and give them generous repayment plans but there is an absolute condition that from that point forward they can not fall further behind? Are we doing them any good by allowing a $50,000 debt to become a $500,000 debt?
If they are closed is it possible the business they had goes to a competitor who with increased business can have increased hiring?</p>
<p>If they have no customers they owe no sales tax. That is where the big problem on the State level is. The withholding tax is minor in comparison.</p>
<p>What happens to the people whose withheld taxes aren’t remitted? Are they considered to have paid the tax even though the gov’t didn’t get the money?</p>
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