Small Business Taxes & Management

Special Report

Information on the Questionable Employment Tax Practices Memorandum of Understanding


Small Business Taxes & ManagementTM--Copyright 2007, A/N Group, Inc.


QETP Definition: Questionable employment tax practices (QETP) are employment tax schemes or practices that have no objective other than to avoid federal and/or state employment taxes.


General Overview of the Initiative


Purpose of the MOU

The MOU facilitates cooperation and information sharing between the IRS and state workforce agencies; increases compliance with federal and state employment tax filing and payment regulations; increases compliance with Form 1099 and and Form W-2 filing; increases collection of federal and state employment/unemployment tax debts; enhances efforts to reduce the tax gap at the federal and state levels and ensure that businesses are all operating on a competitive level playing field by ensuring that everyone pays their proper share of employment taxes; and leverages IRS, state and other federal agency resources to improve compliance with employment tax laws.


MOU Participants

The MOU is intended to facilitate information sharing between the IRS and state workforce agencies that have an existing Agreement on Coordination of Tax Administration (Basic Agreement) with the IRS and an Implementing Agreement on Coordination of Tax Administration with the IRS. The following parties will participate in the MOU: the IRS Small Business/Self-Employed Specialty Tax Division and the state workforce agencies.

Currently, 29 states have signed the exchange agreement with the IRS. They are: Arizona, Arkansas, California, Colorado, Connecticut, Hawaii, Idaho, Kentucky, Louisiana, Maine, Massachusetts, Michigan, Minnesota, Nebraska, New Hampshire, New Jersey, New York, North Dakota, Ohio, Oklahoma, Rhode Island, South Carolina, South Dakota, Texas, Utah, Vermont, Virginia, Washington, Wisconsin.


What Will Happen Under the MOU


The QETP and Taxpayer Privacy

The MOU meets all disclosure provisions to ensure the privacy of taxpayer information. Additionally, all participating states must demonstrate they have systems in place to ensure the safety of any IRS data they receive as a part of the information exchange agreement.


QETP Beyond the MOU


Copyright 2007 by A/N Group, Inc. This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is distributed with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional service. If legal advice or other expert assistance is required, the services of a competent professional should be sought. The information is not necessarily a complete summary of all materials on the subject.--ISSN 1089-1536

Return to Home Page

--Last Update 11/08/07