May 12, 2015
The first audit would be a “learning experience” that would draw no interest penalty for financial problems that are found unless fraud or tax evasion are involved, according to Rep. Jesse Kremer of Kewaskum, the plan’s author. Any accounting errors revealed by subsequent audits would incur payment penalties equivalent to the U.S. Federal Reserve prime rate plus 1 percent, rather than the current 12 percent flat rate.
The current Federal Reserve prime rate, which fluctuates, is 3.25 percent, which means that if Kremer’s plan was law today it would reduce from 12 percent to about 4 percent the financial penalties for small businesses tagged with accounting mistakes.
Meanwhile, individuals who fail to file or pay their state income taxes on time face a 12 percent annual penalty on taxes they owe.
Kremer’s measure requires the Department of Revenue to gradually reduce the current 12 percent fixed penalty by 0.5 percent a year beginning in 2016 until the penalty rate equals the prime rate plus 1 percent. Each 1 percent reduction in the current 12 percent penalty rate is equivalent to an $11 million reduction in penalties, according to Kremer’s proposal.
Kremer said many small businesses, which are defined in his proposal as those that gross $5 million a year or less, need a break because they cannot afford to hire accountants and are forced to “muddle through the regulations by themselves.”
In addition to owning a small business, Kremer, who was elected in 2014, received nearly $1,100, or 10 percent of his total large individual and political action committee contributions, from business interests between January and Oct. 20, 2014.