U.S. Senator Barbara A. Mikulski (D-Md.) today was joined by Maryland small business owners to announce that she is introducing the Small Business Tax Fraud Prevention Act, legislation to protect small business owners victimized by payroll service provider (PSP) tax theft and fraud. Senator Mikulski was joined by small business owners affected by alleged PSP fraud including Dave Benfield of DuClaw Brewing Co. along with Sheryl Davis-Kohl of the Harford County Chamber of Commerce.
"Maryland's small businesses are the backbone of our economy. My great-grandparents owned a local bakery and my father ran a grocery store. I learned how these businesses help weave social fabric by hiring local workers and investing in their communities. When small businesses are harmed, they need a government on their side," Senator Mikulski said. "Today I am taking action to protect our small businesses victimized by payroll service provider tax theft and fraud. Through common-sense reforms, we will protect small business victims from scheming tax theft and cut through the red-tape to ensure they are not victimized again by the IRS."
Several Maryland small businesses that have used services of a PSP believe their provider failed to pay, or made only partial payments, of federal and state withholding and unemployment taxes. These small businesses have been hurt by late fees and penalties resulting from misdirected and delayed state and federal taxes.
The Small Business Tax Fraud Prevention Act would protect small businesses who have been victimized by PSP fraud by increasing oversight of the industry while providing needed protections to small businesses. Specifically the legislation would:
· Increase oversight of PSPs by requiring them to register with the Internal Revenue Service (IRS) and be IRS bonded or certified;
· Provide protections to small businesses by requiring the IRS to send dual notification to a business when its address has been changed by a third party payer;
· Penalize a PSP who fails to remit taxes for a client;
· and provide assistance to defrauded businesses who need relief from tax liability by requiring the IRS to give greater consideration to ETA Offers of Compromise.
Earlier this month, Senator Mikulski wrote to IRS Acting Commissioner Steven Miller to express her frustration with reports that the IRS has been aware of payroll service provider irregularities and has not taken significant steps to protect small businesses. She repeated her demand that Acting Commissioner Miller take immediate action to prevent third-party payer fraud in the future, and called on him to expedite any Request for Abatement of Interest for Maryland businesses that may have been affected in the midst of tax season.