measures to address compliance with the tax rules for S corporations (GAO-10-195): The Government Accountability Office today released tax Gap

Be filed, according to the IRS, about 68% of S Company tax returns for the years 2003 and 2004 (the year data are available) misreported at least one point. Over 80% of the time, gave false statements in a tax benefit for the company and / or shareholder. The most common errors involved the deduction of expenses not eligible S Corporation shareholders, the tax debt could be reduced. Even if the majority of companies, S paid preparers, 71% of those who do not follow. Representatives of interest groups, said that the failure to submit to the preparer, can the lack of standards and their disregard for preparer of tax rules. Shareholders of S Company also has errors in calculating basic - the percentage of ownership of the company - when taking the losses they passed from the companies that may reduce the total taxes. IRS officials noted, and representatives of interested parties that the calculation and monitoring of the base was one of the biggest challenges for the shareholders, S corporations and that they themselves in a better position in most cases to provide a basis for its shareholders to calculate .

To ensure compliance with the provisions of the shareholder base to improve, Congress should require S corporations to calculate and the actions of the shareholders and debt based report as completely as possible. S company would report this calculation on Schedule K-1 and send to shareholders and the IRS. If Congress judges that the information should be current share price is up to the shareholders are not transmitted to the S stock company for reasons of confidentiality is an alternative to require companies to report calculations of the S-less completely with available information society S.

To cope with the challenges of compliance with the rules S corporation, we recommend that you take the services Commissioner of Internal Revenue, the following four measures:

To pay • identifying and assessing opportunities for improving performance, the tax preparers S corporation, such as tax preparers license and prepare to ensure that adequate sanctions are available and can be used.

• Send more information about S Aktiengesellschaft rules and record keeping requirements for the new S corporations to distribute to its shareholders, including guidelines for the calculation of basic and refer to the website specific rules of the IRS tax related p.

• Require auditors, their analysis compared to determine when the use of data on wages with the appropriate remuneration of shareholders, or document why no analysis was necessary to document to.

• Provide more guidance to shareholders and tax preparers, auditors, such as those provided to the IRS, to determine the compensation of shareholders by appropriate means such as the IRS website.