Excerpt from NASE’s Washington Watch, August 29, 2007.

According to the GAO,

  • Two in five sole proprietors (6.9 million) made an error on the gross income line of Scheudle C and are underreporting about $53 billion net.
  •  An estimated 73% of sole proprieters (10.9 million) are over-reporting their expenses by about $40 billion net.
  • 55% of expense misreporting occurred in the car and truck, depreciation, supplies and other categories.

The GAO recommends increasing assistance to first time Schedule C filers, deny benefits/payments until tax obligations met (Social Security, Medicare), withhold tax to encourage tax compliance.

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 With statistics like the ones above, no wonder the federal government is working on more legislation to increase the accounting requirements for businesses.