The bill, titled the "Tax Administration Good Government Act," is sponsored by U.S. Sen. Olympia Snowe, R-Maine. The provisions were prompted by problems experienced by taxpayers in Saco, Maine after a payroll firm kept $8 million in client money that was supposed to be used for payroll taxes.

The bill would come too late to help clients of Dayton [Ohio] businessman Rodney Richley, owner of the now-defunct Payroll Data Service. Richley's clients have accused him of taking more than $1 million of the money he collected to pay their federal and state payroll taxes. Six of Richley's former clients have sued him in Montgomery County to recover their money and one has gone out of business. Richley is under investigation by federal and state tax authorities.

"The small business provisions adopted in this bill could potentially prevent millions of dollars in back taxes, penalties and fines for taxpayers who can least afford and deserve them," Snowe said. "Complying with the tax code is one of the most costly and time consuming requirements the federal government puts on small business. Passage of this common-sense approach to protect taxpayers could help protect innocent small businesses from bankruptcy and financial ruin."

U.S. Rep. Rob Portman, R-Cincinnati, is the House sponsor of the bill, but the content of the bill was changed substantially by Snowe when it reached the Senate. Originally introduced as the Taxpayer Protection and IRS Accountability Act of 2003, the bill would have made several changes to the tax code, including waving penalties for unintentional minor errors committed by taxpayers with a history of tax compliance.

The IRS National Taxpayer Advocate Nina Olson said the bill is the first step in addressing a serious problem for taxpayers.

"If the taxpayer or the IRS is unable to collect withheld taxes from a payroll service company because it is no longer in business or its assets are otherwise unavailable, the Internal Revenue Code continues to hold the taxpayer -- and its owners, offices and employees -- liable for the unpaid taxes," Olson said. "The innocent taxpayer is, in fact, forced to pay its payroll taxes twice -- once to the noncompliant payroll service and again to the IRS."

Mark Campbell, president of Wayside Collision Center, said he supports the safeguards Snowe included in the bill.

Wayside learned last spring after Payroll Data Service shut down that it owed $11,000 in payroll taxes, even though Payroll Data Services had taken the money out of the company's bank account to pay the taxes. Campbell sued Richley for the money.

"I think we need to remember that additional regulation could equate to additional expense, but that said, I think it would be money well-spent," Campbell said.

Of the eight lawsuits filed against Richley, four of the plaintiffs have been awarded default judgments against Richley totaling more than $1.6 million and another client has filed a request for a default judgment. On April 22, Citibank filed a lawsuit against Richley claiming he failed to pay more than $16,000 in credit card bills. Richley has not been criminally charged.

The House passed the original bill last June, and Senate passed its version of the bill in May. The bill was returned to the House for a vote on the amended bill.

-- Shannon Joyce Neal