Tax professionals are warning that owners of small businesses may soon find themselves in a battle with the Internal Revenue Service that is drawn out and expensive (IRS).
A key provision in the Inflation Reduction Act will end up targeting small business owners to pay for the legislation, as stated by the Joint Committee on Taxation, an independent organization that acts as a watchdog organization on taxation matters.
For the Internal Revenue Service (IRS) to become more effective in its pursuit of unreported income, this provision allocates an additional $80 billion to the IRS.
The proposal stands in stark contrast to President Biden’s longstanding claim that he would not raise taxes on anyone making less than $400,000 because only 4 per cent to 9 per cent of the revenue would come from corporations making more than $500,000 per year.
The executive vice president of the National Taxpayers Union Foundation, Joe Hinchman, stated in an interview with The Post that the Internal Revenue Service (IRS) will have no choice but to go after small and medium businesses because those companies “won’t fight back.”
“We’ve been through something very much like this before… The Internal Revenue Service claims that it will “go after the rich,” but when you’re trying to raise that much money, even the wealthiest individuals can only take you so far.
A rise in the number of IRS agents could be especially detrimental to the operations of smaller businesses.
In point of fact, it may be more profitable for auditors working for the Internal Revenue Service (IRS) to target people in the lower and middle classes rather than the wealthy to increase their take from taxation. [citation needed] “The rich have their attorneys and fight it,” Hinchman says, adding that this is one of the reasons why it is easier to go after the poor. “The rich have their attorneys and fight it,” Hinchman says.
As a result, tax specialists are sounding the alarm that audits carried out by the Internal Revenue Service (IRS) will be significantly more stressful and expensive for owners of small businesses. This is the case even for those business owners who are confident in the accuracy of their tax filings.
The Internal Revenue Service will receive an additional $80 billion as a result of a compromise that has been reached between Senators Joe Manchin and Chuck Schumer.
The statement “The vast majority of small businesses aren’t doing anything wrong” was attributed to Daniel Bunn, executive vice president of the Tax Foundation, and was published in The Post. “We do not make the tax law any simpler, and because the tax code is already so complicated, owners of small businesses can’t comply with all of the regulations,”
According to Bunn, even if the owners of small businesses do everything correctly, they may still find themselves dealing with a headache as a result of the expansion of the IRS, which will involve the mailing of additional notices and letters to firms.
In other words, even if the owners of small businesses do everything right, they may still find themselves dealing with a headache.
An individual contractor or a small business can fall into the red after receiving a letter from the Internal Revenue Service informing them that they owe additional money or that they made an error on their taxes.
Bunn continued by saying that “anytime you get a notice from the IRS, it may take months or years to get it settled, and we’re talking about many thousands of dollars to address.” “Large corporations have frequent reviews, and lawyers are going through everything,” but “little businesses don’t have the resources to fight back in the way.”
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Claims that the bill will be detrimental to Americans with lower and middle incomes have been refuted by the White House. Instead, the White House has brought attention to the fact that the estimate provided by the JCT does not take into account the extent to which the bill will offset costs for average Americans, such as the cost of prescription drugs.
On the other hand, tax experts do not share the same level of optimism regarding the possibility of offering additional resources to the IRS.
“The strategy here is to double the staff of the IRS, let the leash off of them, and see how much they can collect,” according to Hinchman. “I have faith that they will be able to collect it; despite this, the procedure will be rather unpleasant.”
