With all the time and effort that goes into running a successful small business, worrying about tax compliance should be near the bottom of any entrepreneur’s to-do list.
S. 2689, the “Small Business Taxpayer Bill of Rights Act,” introduced by Senator John Cornyn (R-Texas) and co-sponsored by Senator Dean Heller (R-NV) and Senator Pat Roberts (R-KS), implements numerous IRS reforms so that small business owners are treated fairly and adequately protected from IRS overreach.
Senators should co-sponsor and support this bill to ensure that business can spend more time creating jobs and increasing wages, and less time complying with burdensome IRS rules.
Bringing Relief to Small Businesses
Small businesses are the engine of the American economy. There are approximately 30 million small businesses, and workers employed by small businesses comprise approximately 99% of the workforce. The reforms in this bill will bring much-needed relief to small business owners who have struggled under a dysfunctional IRS for far too long.
As its name suggests, the Small Business Taxpayer Bill of Rights Act bill brings much-needed relief to small businesses. If passed, this legislation would require the IRS to release a levy (a seizure of assets) if it is creating an economic hardship for the taxpayer. This would give small businesses another chance to comply with the IRS without having to shut down or fire employees.
Compensates Taxpayers for IRS Bureaucracy and Misconduct
One of the most ridiculous ways that the IRS abuses taxpayers is by subjecting them to random audits by the IRS’s National Research Program. These random audits are called “super-audits” because they are performed to improve tax administration. Even if the taxpayer is fully compliant with the audit, the NRP’s audits are significantly burdensome. Taxpayers selected for super-audits are essentially guinea pigs: they have to contend with random and intensive audits as well as pay for their own representation. The Cornyn bill would alleviate the financial burden by allowing taxpayers to deduct $5,000 for NRP-related expenses.
The bill also increases the ability of taxpayers to seek compensation to taxpayers in the case of IRS misconduct. For instance, Sen. Cornyn’s bill expands eligibility for small businesses to recoup attorney fees when the IRS takes action against them that are not substantially justified.
In addition, the law allows taxpayers to claim up to $5,000,000 in damages in a civil action when the IRS engages in abusive or reckless conduct, increases the maximum penalty imposed on IRS agents that engage in extortion, fraud, and bribery to $25,000, and allows taxpayers to receive $10,000 (indexed for inflation) for every unauthorized inspection or disclosure of their tax information by a government employee or officer.
Strengthens Taxpayer Protections
The bill contains numerous also contains provisions to ensure the IRS is acting in the best interests of taxpayers. The new legislation bans secret communications between the IRS and the IRS Office of Appeals when discussing a taxpayer’s case, and makes violations of this new rule a fireable offense. This safeguard ensures that the Office of Appeals is truly independent. The Cornyn bill also requires taxpayer consent before including IRS Counsel or compliance officials to participate in an Appeals conference, overturning a recent rule that needlessly increases the contentiousness of the appeals process.
In addition, the Cornyn bill increases the fine for unauthorized disclosure of taxpayer information by IRS employees from $5,000 to $10,000. Leaking taxpayer information is a felony and can land the offending IRS employee in jail for up to 5 years.
Equal Treatment Under the Law
In order to ensure that taxpayers are not targeted for audits by their race, religion, or political ideology, S.2689 would require the Treasury Inspector General for Tax Administration (TIGTA) to consult with the IRS on any criteria it uses to select tax returns for audits. Conservatives know the importance of maintaining safeguards against being targeted for political ideology.
A notable example of the IRS’s abuse of taxpayers is its systemic targeting of conservative groups. IRS employee Lois Lerner’s hatred for conservatives and tea party groups led to only one of them gaining non-profit status in 3 years. Lerner targeted tea party groups with onerous audits to sideline them from participating in the 2012 election. This bill would be an excellent first step in ensuring that taxpayers aren’t targeted for audits based on race, religion, or political ideology.