As Tax Day arrives Tuesday, America’s small businesses are worried that their own government will treat them like suspected criminals, even as they hire workers, raise wages and strengthen their communities.
The Biden administration and Congress recently gave the IRS nearly $80 billion in additional funding over 10 years. Much of that funding is being directed at enforcement activities.
Main Street needs help making sense of complicated tax laws. It doesn’t need to be hurt by IRS agents second-guessing every small-business move.
The administration insists that small businesses will not be the target of this massive new IRS enforcement focus, but business owners are skeptical. Big businesses and the wealthy, with their armies of lawyers and accountants, make it a difficult target for IRS agents. Meanwhile, small businesses, farms and family-owned businesses, with their limited resources, are the low-hanging fruit for expanded IRS enforcement.
Small businesses drive job creation
Small-business owners are law-abiding citizens who pay their taxes, on time, year after year. Instead of assuming small businesses are cheating on their taxes, the IRS should focus on taxpayer education efforts to ensure they have assistance and guidance from their government instead of pressure and suspicion.
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Small businesses deserve better, after all they’ve done for America. They’ve created nearly 13 million net new jobs over the past 25 years, accounting for 2 out of every 3 jobs added to the economy. While big businesses have laid off tens of thousands of people, small businesses continue to hire – and most have job openings they cannot fill.
Small-business owners are the engines of economic growth and job creation for communities across America. Yet that engine risks stalling if the IRS throws a wrench in the gears with audits and burdensome actions.
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Instead of audits and intimidation, Congress should make sure the IRS prioritizes clearing its massive backlog. According to a report from the Treasury Department’s Inspector General, the IRS has more than 2 million unprocessed tax returns and more than 400,000 unprocessed small-business pandemic tax credit forms.
Small businesses are still waiting for pandemic relief
The IRS has prevented small businesses from receiving key pandemic relief in a timely manner. Small-business owners counted on these benefits and continued to deal with the challenges that began in the pandemic, such as inflation and workforce shortages. It is difficult for small businesses to plan for their future when they don’t know when they’ll get the relief they’re owed.
The federal investigators stated that “improving taxpayer service” is the top challenge the IRS faces in 2023. But the IRS is not adequately tackling this enormous and urgent issue. When the administration and Congress gave the agency the $80 billion over the decade, they directed only 4% of the money to quickly resolve taxpayer issues when they arise.
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Small businesses need a lot more than that – and a lot less antagonism. In January, the House of Representatives voted to roll back most of the $80 billion in increased enforcement funding while maintaining the taxpayer service funding. The Senate and the White House should be willing to talk about reforms that would help the agency work better, while also preventing upcoming mandates that will make small businesses’ survival even harder.
The IRS should focus on education and compliance assistance so that more small businesses know how to navigate the labyrinth of tax rules. And it should emphasize taxpayer service improvements over audits and investigations.
Small businesses face hurdles every day to keep their doors open, serve their customers and strengthen their communities. They need more certainty and support from the IRS. They didn’t need the IRS to get an $80 billion bonus that could be used to target Main Street.
Brad Close is president of the National Federation of Independent Business.