How Expanded IRS Enforcement Will Hurt Main Street

April 19, 2023

Small business owners urge the IRS to prioritize serving taxpayers

How Expanded IRS Enforcement Will Hurt Main Street

Taxes remain a top concern for small business owners according to an NFIB survey. NFIB’s President Brad Close recently published an op-ed on small businesses’ concerns about the IRS, specifically pointing to a law passed last year that gives the Internal Revenue Service (IRS) an additional $80 billion, mostly for enforcement expansion. The plans for how that money will be used are particularly worrisome to small businesses. “The Biden Administration and Congress recently doubled the IRS budget, adding nearly $80 billion in additional funding for the IRS, yet most of that funding is being directed at enforcement activities, not education or assistance,” Close wrote. “Main Street needs help making sense of complicated tax laws. It does not need to be hurt by IRS agents second-guessing every small business move.” One solution that small business owners support is the Family and Small Business Taxpayer Protection Act, H.R. 23, which removes billions in Internal Revenue Service (IRS) enforcement funding and directs the IRS to instead prioritize serving taxpayers rather than focusing on expanded enforcement efforts. NFIB designated H.R. 23 as a Key Vote for the 118^th Congress. Some of the frustration for small business owners lies in the fact that throughout the pandemic it was nearly impossible to get any assistance or answers from the IRS on when their returns would be processed. The same small businesses who have created nearly 13 million net new jobs over the past 25 years, accounting for two out of every three jobs added to the economy, were unable to get assistance or a timely tax return processed while dealing with pandemic shutdowns and daily changes to regulations. “More enforcement will further limit the IRS’s ability to provide the better taxpayer service that small businesses urgently need,” Close wrote. “In a recent NFIB survey, about two-thirds of small business owners who talked with the agency told us their interactions weren’t helpful. They were often placed on hold for hours on end and given no clear timeline for when – or if – their problems would be addressed and their returns processed.” Leading up to Tax Day, NFIB collected over 11,000 petitions from small business owners as part of a campaign against Congress and the Administration wrongly characterizing small businesses as taking advantage of a “tax loophole.” NFIB delivered this 134-page document to Congress on Tax Day and small business owners continue to speak out in Washington, D.C hearing and field hearings across the country about the ongoing economic challenges they face. “Small business owners are law-abiding citizens who pay their taxes, on time, year after year,” Close wrote. “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.” Although the Administration claims enforcement won’t target Main Street, the additional money budgeted for the IRS has only 4% directed to improving taxpayer service. The IRS Operations Plan, released on April 6, 2023, is vague and fails to define key terms “large corporation,” “large partnership,” and “historical rates“ for audits. This proves there currently aren’t any plans to tackle the enormous and urgent tax issues that directly impact small business. “Big business and the wealthy, with their armies of lawyers and accountants, make a very difficult target for IRS agents,” Close explained. “Meanwhile, small businesses, farms, and family-owned businesses, with their limited resources, are the low-hanging fruit for expanded IRS enforcement activities.”

To hear more from Close on this topic, listen to the most recent episode of the Small Business Rundown. Take Action: NFIB strongly encourages the Senate to take up the legislation. Act now and urge your Senators to act on legislation to rescind billions in funding from the IRS.

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Topics:

Agriculture

Regulations

Taxes

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