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Most of New IRS Revenue Will Come From Small Businesses

Over the past few weeks, the new   was passed. This bill included a whopping $80 billion in funding to the IRS to improve the agency’s collection of under-reported income. This will inevitably end up targeting many small businesses to help pay for the legislation, according to nonpartisan watchdog the Joint Committee on Taxation. This group estimates that anywhere between 78% and 90% of the additional $200 billion the IRS will collect will come from businesses making under $200,000 annually.

Why Smaller Companies?

Going after these small to medium businesses can prove to be far more beneficial to the IRS, simply because they can’t or won’t put up as much of a fight as some of the larger companies. The ideology behind this is that larger businesses have good lawyers to fight the IRS. “The IRS will have to target small and medium businesses because they won’t fight back,” Joe Hinchman, executive vice president at National Taxpayers Union Foundation, said. “We’ve seen this play out before… the IRS says ‘We’re going after the rich’ but when you’re trying to raise that much money, the rich can only get you so far.” Tax experts warn that the IRS’ audits will be a lot more painful for small businesses, even for the ones that think they’re filing their taxes correctly.

So Am I at Risk?

Even if these small businesses file all of their taxes correctly and check all the boxes, they still may be faced with issues. For people who are individual contractors or run small businesses, receiving an IRS letter stating you owe more money than they originally expected for unintentionally making a mistake on your taxes, could be enough to put you in an irreversible position. “Anytime you get an IRS letter, it could take months or years to get it settled — we’re talking many thousands of dollars to address,” said Daniel Bunn, executive vice president at the Tax Foundation, “Large companies have constant reviews and lawyers going through everything … small business doesn’t have the resources to fight back in the same way.”

Wrap Up

As most people know, the IRS can be a pain to deal with at times, and it doesn’t seem like it is going to get any easier for small businesses. If you own a small business and want to make sure dealing with the IRS goes as smoothly as possible, it could be a great idea to call a trusted financial advisor to make sure you have all of your taxes in order.

 
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