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Hunting Season

Feds try to protect the little guy from payroll tax predators.

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This story appears in the September 2004 issue of Entrepreneur. Subscribe »

You hire a payroll firm to take care of paying employment taxes to the . You send them the , and they pass it on to the feds. Right? Well, not always. Therein lies the genesis of Sen. Olympia Snowe's (R-ME) amendment to the Tax Administration Good Government Act (H.R. 1528), which passed the in May. The amendment gives the IRS tools to go after payroll/accounting firms that steal a client's employment tax , and protection to firms that hire those rogue firms.

In the first and, so far, last instance of the IRS and the Justice Department taking a payroll company to court, a federal court in Salt Lake City issued a preliminary injunction in April 2003 appointing a receiver to shut down a company called Provident Management Group. Provident allegedly failed to file at least 282 federal employment tax returns for their customers, and failed to make more than $2 million in required employment tax deposits on their behalf.

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