Global Courant 2023-05-05 07:18:02
The IRS used National Small Business Week to tout President Biden’s Inflation Reduction Act, which critics say will allow the IRS to target small businesses for more tax dollars.
National Small Business Week runs from April 30 through May 6. To mark the occasion, the IRS sent a press release providing “advice” on how small business taxpayers can take advantage of new and existing tax breaks.
“The IRS joins the Small Business Administration and others in both the public and private sectors in celebrating the hard work, ingenuity and dedication of America’s small businesses and their contributions to the economy,” the release read. “With next year’s filing deadline nearly a year away, business owners still have time to identify potential tax breaks, take action to qualify, and then claim them when they file in 2024. They also have time to plan for reporting changes and even to overlook claims of tax benefits from the recent past.”
The IRS identified potential benefits for companies that continued to pay their employees during the COVID pandemic and helped pay their employees’ college debt, among others. The first benefits mentioned, however, were ways for small businesses to “cut energy costs” and “expand clean energy credits” as a result of the Inflation Reduction Act, a massive Democrat-backed spending package that Biden passed into law last year. signed.
Vice President Kamala Harris delivers remarks alongside President Biden at an event celebrating the passage of the Inflation Reduction Act on the South Lawn of the White House on September 13, 2022 in Washington, D.C. (Anna Moneymaker/Getty Images)
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“The Inflation Reduction Act (IRA), which took effect last summer, includes provisions that allow small business owners to save money on energy costs,” the release said. Small businesses can get a tax credit that covers 30% of the cost of switching to low-cost solar power, reducing operating costs and protecting against volatile energy prices.
“Small business owners can get a tax credit of up to $5 per square foot to support energy efficiency improvements that result in lower utility bills. Through the Clean Commercial Vehicle Credit, small businesses that use vehicles, such as trucks and vans, can benefit from tax reductions of up to 30% of the purchase costs for clean commercial vehicles, such as electric and fuel cell models that meet the applicable requirements.
“There is no limit to the number of Clean Commercial Vehicle credits a company can claim. These credits are non-refundable, so companies cannot get back on the credit more than they owe in taxes.”
The press release came two weeks after Senator Joni Ernst, R-Iowa, wrote a letter to IRS Commissioner Daniel Werfel accuses his agency of launching a “witch hunt” against small businesses over its plan outlining how it will spend Biden’s Inflation Reduction Act money.
“Now is just not the time to place unnecessary burdens on our small businesses as they continue to struggle with recent economic challenges,” Ernst wrote. “Instead of starting a small business witch hunt by raising audit rates without justification, we should focus on tax solutions that promote small business growth and economic competitiveness.”
The Inflation Reduction Act awarded the IRS $80 billion to hire thousands of new employees over the next decade. The Tax and Customs Administration wrote in its recently published “strategic operational planthat it will use the funds in part to “increase enforcement activities in other key areas where audit coverage has declined while complying with the Treasury Department’s guidance not to increase audit rates from historic levels for small businesses and households earning $400,000 a year or less.”
Ernst specifically cited that provision, which suggests companies earning more than $400,000 a year may be subject to the IRS’s increased “enforcement efforts,” arguing that such a threshold is lower than any other industry standard for a “large company”.
Senator Joni Ernst, R-Iowa, talks to reporters after the Senate’s weekly Republican policy luncheon at the Capitol on Feb. 14, 2023. (Chip Somodevilla/Getty Images)
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The senator demanded that Werfel provide more clarity on how the IRS proposal would be implemented, such as whether the $400,000 figure refers to the company’s net income or sales.
“It is not clear on what precedent the IRS determined that a large corporation is an entity that earns more than $400,000 in revenue. Under this approach, enhanced tax enforcement efforts would apply profoundly to small businesses across the country,” wrote Seriously. “It is abundantly clear that small businesses will bear the brunt of these enforcement efforts; not just large corporations and the wealthiest taxpayers.”
The senator noted that a small business with about five employees would bring in more than $424,000 on average, citing data from the US Census Bureau.
Both Werfel and Treasury Secretary Janet Yellen have repeatedly vowed that funding from the Inflation Reduction Act will not go toward more audits for middle- and low-income Americans or anyone making less than $400,000 a year.
When reached for comment on this story, the IRS Fox News Digital referenced comments made by Werfel in testimony before the House Ways and Means Committee last week.
“(Inflation Reduction Act) funding also presents us with an important opportunity to improve enforcement efforts to promote fairness while respecting taxpayers’ rights,” said Werfel. The agency will follow Secretary Yellen’s guidance not to increase audit rates above historic levels for small businesses and households earning less than $400,000.
“I want to be crystal clear: We are not increasing audit rates on hard-working taxpayers making less than $400,000. That’s my promise. There won’t be another wave of audits for employees, retirees, and others.”
IRS Commissioner Danny Werfel speaks after being sworn in at IRS headquarters in Washington, DC, April 4, 2023. (Ting Shen/Bloomberg via Getty Images)
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a National Accountability report last year’s report found that most IRS audits are historically conducted on individuals and businesses below the $400,000 threshold.
Werfel later added that the IRS’ “plan is to focus our enforcement efforts on complex returns from wealthy filers.”
However, despite the IRS chief’s comments, Yellen did not deny in congressional testimony in March that possibly 90% of new IRS audits using Inflation Reduction Act funds would come from lower- and middle-income individuals who earn less than $400,000 a year.
Yellen was indeed named by Representative Adrian Smith, R-Neb. would not exceed historic rates.
“I’m talking about the share of that small companies and families,” replied Yellen.
“OK, so the share. I mean, for the record, the share is 90%,” Smith said, referring to the GAO report. “So 90% of the new audits will be, you know, according to the data, we can expect up to 90% of the new audits to be on those who make less than $400,000.”
Treasury Secretary Janet Yellen February 27, 2023 (Genya Savilov/AFP via Getty Images)
YELLEN DOES NOT DENY THAT 90% OF NEW IRS CHECKS WOULD AFFECT THOSE WHO MAKE LESS THAN $400,000
Yellen did not reject Smith’s conclusion, but reiterated that the goal is to increase audit rates for high-income earners. However, Smith pointed to data suggesting it will be “wider than that.”
Both the GAO and the Syracuse University Transactional Records Access Clearinghouse have found in repeated analyses that low-income taxpayers are audited much faster than high-income taxpayers.
Experts say it’s difficult to calculate the average cost of an IRS audit for the common American since each audit is unique to a given circumstance. Some organizations average thousands for a mail check and tens of thousands for a more intrusive IRS field check. That doesn’t include additional fines or potentially thousands of dollars required to pay attorneys or accountants to help with the audit process, which can be complex and require confusing paperwork.
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Another issue taxpayers may face when faced with audits is the legal process if they challenge the IRS. Unlike normal courtrooms, where defendants are presumed innocent until proven guilty, in tax court the burden of proof It’s up to the taxpayer to prove the IRS wrong.
Aaron Kliegman is a political reporter for Fox News Digital.
