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How States Are Cracking Down on Small Business Tax Cheats

Small businesses and the self-employed stiff the federal government on billions of dollars (PDF) in unpaid taxes each year, according to IRS estimates of the tax gap. That’s the difference between taxes owed and the amount actually collected. States also have tax gaps: California’s is about $10 billion annually, and the Golden State is investing $670 million over five years in technology to improve its collections, expected to raise an additional $1 billion a year in tax revenue.

California isn’t alone. According to interviews with revenue officers from 30 states published last week by Bloomberg BNA, states are betting on new compliance tools aimed at collecting billions of dollars in unpaid taxes. While those efforts aren’t focused solely on Main Street, there are plenty of developments small business owners would do well to keep up on. Here are four takeaways from the BNA report: