Bond calls for 'early warning system?

Small businesses that fall behind in paying employment taxes quickly land between a rock and a hard place. When confronted with a choice between paying operating expenses or depositing em-ployment taxes, struggling businesses may opt to pay business expenses instead of taxes.

An efficient early warning system to identify these taxpayers will benefit small businesses that want to comply with the law and will help the IRS collect taxes owed.

I have urged the IRS's Small Bus-iness/Self-Employed Division to take the lead in improving early intervention and compliance assistance by adopting programs designed to help small employers avoid employment tax delinquencies, as recommended in a new General Ac-counting Office report.

I outlined these concerns recently in letters to IRS Commissioner Charles O. Rossotti and IRS Small Business/Self-Employed Division Commissioner Jo-seph Kehoe.

In that letter I emphasized that the agency's current policy of delaying en-forcement and collection from delinquent employers until after timely filings are processed only compounds penalties for small businesses.

In its report (GAO-02-92), the GAO identified four intervention programs that the IRS has developed to help prevent employment-tax delinquencies and the pyramid effects of the penalties and interest.

However, General Accounting Office investigators found that those programs are in various states of use, and that the IRS has not sufficiently evaluated their effectiveness.

Moreover, the IRS' modernization ef-forts do not include any programs specifically designed to improve notification to employers with employment tax delinquencies.

Often small businesses are challenged by payment requirements because their owners may not have sufficient capital or may lack experience or training in business tax obligations, making it difficult for them to remain economically viable.

According to IRS data for fiscal year 2000, delinquent employers accounted for approximately $5 billion in unpaid employment taxes out of the total $1.3 trillion in delinquent taxes that the IRS collected.

I also have urged Commissioner Ros-sotti and Commissioner Kehoe to task the IRS Small Business/Self-Employed Division with implementing a plan for evaluating the effectiveness and efficiency of existing early-intervention programs, as well as future plans to improve compliance in those areas.

In light of the significance of the penalties, time is clearly of the essence, especially when it comes to identifying the nonfilers and helping them to return to compliance.

Failure to do so only increases the chances that the business will fail before the IRS can collect any of the taxes due.

(Christopher "Kit" Bond is a U.S. senator representing the state of Missouri.)