NFIB-Supported Amendment Would Have Protected Small Businesses from Extra IRS Audits

Date: August 17, 2022

The amendment was considered an NFIB Key Vote for the 117th Congress

The Inflation Reduction Act of 2022, a revived version of the Build Back Better Act, was signed into law Aug. 16. While small business owners saw a major victory when Congress dropped a new 3.8% tax that would impact Main Street, NFIB sent a letter of concern to the House and Senate addressing the bill’s issues that would affect small businesses. Despite the bill’s name, analysts show skepticism about whether the package will work to reduce inflation, a top concern of small business owners.

 

In the Senate, the Inflation Reduction Act of 2022 had a proposed amendment offered by Sen. Mike Crapo that would protect small businesses earning less than $400,000 from costly and burdensome Internal Revenue Service (IRS) audits. The Crapo amendment (No. 5404) was considered an NFIB Key Vote for the 117th Congress but was rejected with a 50-50 vote.

 

“The Inflation Reduction Act of 2022 appropriates nearly $80 billion for additional IRS funding with the majority of the funding allocated for tax enforcement activities,” NFIB Vice President of Federal Government Relations Kevin Kuhlman wrote in NFIB’s Key Vote letter. “This legislation’s heavy focus on enforcement rather than resolving the tremendous paperwork backlog is a disservice to small businesses and taxpayers. The IRS is grappling with over 21 million unprocessed paper returns, an issue that is consistently reported to NFIB as a major issue for many small business owners.”

 

Additional compliance burdens require time and resources that are in short supply with the current economic challenges caused by inflation and workforce shortages. Those who support the legislation argue the strict enforcement will only affect wealthy tax cheats, but NFIB remains concerned that these efforts will negatively impact law-abiding business owners. Language in the bill states that the revenue title does not intend to increase taxes on any taxpayer or small business with a taxable income below $400,000, but similar protections are not afforded to the increased enforcement activities.

 

The majority of small business owners pay their businesses’ taxes on their individual tax returns which would cause them to be impacted by increased audits. NFIB recommends a better approach for small businesses would be to provide additional compliance assistance and customer service to help law-abiding small business owners avoid honest mistakes that would trigger an audit.

 

NFIB is disappointed that the Senate rejected amendments to protect small business owners from increased enforcement actions and made changes that made the bill more problematic for small businesses, including tax and healthcare changes that limit the ability to smooth out business losses and increase health insurance costs. 

 

Kuhlman added, “As expectations for better business conditions is currently at a historic low in the 48-year history of NFIB’s survey of small business owners, a better approach for small businesses would be legislative and regulatory certainty, including no direct or indirect tax increases on business, and relief from regulations and mandates that increase the cost of doing business.”

 

Take action: Send a message to thank or hold your legislators accountable for their votes on the Crapo amendment.

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