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T. Keith Fogg, In Whom We Trust, 43 Creighton L. Rev. 357 (2010).

Abstract: The federal government collects the majority of taxes through business entities that are required to withhold taxes from wages or collect excise taxes at the time of providing services. These business entities hold the taxes they collect in trust for the United States. The vast majority of business entities pay over the taxes held in trust in a timely and appropriate manner; however, a sizeable amount, in dollar terms, does not get paid. Aside from passing criminal laws at or near the passage of the 1954 code, Congress has done little to create a structure that provides incentives for business entities acting as trustees to pay over these collected taxes. This article explores the literature that has primarily developed with respect to the tax gap seeking to find structural answers to the problem. Most of the literature addresses issues concerned with underreporting taxes rather than the underpayment of taxes but certain ideas on how to influence taxpayer behavior are transferable to underpayment. Applying appropriate structural principles to the problem, the article explores some of the solutions adopted by states to see if importing those solutions could assist the federal government in collecting these taxes. Five specific recommendations follow from the study and these recommendations range from information gathering to monetary incentives for timely compliance to requiring bonds. The range of proposed solutions is intended to address the range of reasons for the non-compliance. Through the implementation of these solutions or similar ideas that create the proper structure for taxpayers serving as trustees, this corner of the tax gap should be reduced.