IRS Reviews Letters Sent to Small Businesses, Defends New Approach

“A small business that receives one of these notices is very likely to feel alarmed and threatened,” Rep. Sam Graves, R-Mo., wrote Friday. “A small business that receives one of these notices is very likely to feel alarmed and threatened,” Rep. Sam Graves, R-Mo., wrote Friday. Flickr user republicanconference

The Internal Revenue Service in recent days has faced criticism from a House committee chairman and from business owners quoted in a front-page Wall Street Journal story for letters sent to thousands of small businesses suggesting they might have underreported income.

The complaints come at a time when the agency is already under political fire for one of its units’ inappropriate extra scrutiny of conservative groups seeking tax-exempt status.

“A small business that receives one of these notices is very likely to feel alarmed and threatened,” Rep. Sam Graves, R-Mo., chairman of the Small Business Committee, wrote on Friday to Faris Fink, the IRS commissioner for small business and self-employed.

“The letter implies that this is a serious matter that could lead to assessments of additional tax, penalties and interest,” he continued, but the taxpayer is told only that the reported income is off from a computed average. It “gives the taxpayer no idea how much or the source of the information so he can verify the claim and confirm that it is a valid comparison.”

What’s more, Graves wrote, the owner is required to respond within 30 days, “but is not told exactly what he or she is expected to prove.”

The IRS letters, numbering some 20,000, are part of an effort to improve taxpayer compliance based on 2008 housing legislation that allows the tax agency to use debit-card receipts for third-party verification of a business’ reported income. Saturday’s Journal article quoted business owners in Tennessee and Colorado saying the program is “creating some heartache in the small business community.”

The IRS is reviewing the complaints, it said in a statement emailed to Government Executive. “We want to reassure the relatively small number of business owners who receive these letters that the IRS is requesting information based on what the taxpayer reported on the return. Those who have received these letters retain all their taxpayer rights.”

The agency is “working diligently to minimize burden on both taxpayers and tax professionals,” the statement said.

“We want to stress that our approach is measured and equitable in several ways, including giving taxpayers the opportunity to explain and fix errors,” it continued. “An important component of this project is help ensure that people who are non-compliant don’t get an unfair advantage over those that play by the rules and follow the law.”

Stay up-to-date with federal news alerts and analysis — Sign up for GovExec's email newsletters.
FROM OUR SPONSORS
JOIN THE DISCUSSION
Close [ x ] More from GovExec
 
 

Thank you for subscribing to newsletters from GovExec.com.
We think these reports might interest you:

  • Sponsored by Brocade

    Best of 2016 Federal Forum eBook

    Earlier this summer, Federal and tech industry leaders convened to talk security, machine learning, network modernization, DevOps, and much more at the 2016 Federal Forum. This eBook includes a useful summary highlighting the best content shared at the 2016 Federal Forum to help agencies modernize their network infrastructure.

    Download
  • Sponsored by CDW-G

    GBC Flash Poll Series: Merger & Acquisitions

    Download this GBC Flash Poll to learn more about federal perspectives on the impact of industry consolidation.

    Download
  • Sponsored by One Identity

    One Nation Under Guard: Securing User Identities Across State and Local Government

    In 2016, the government can expect even more sophisticated threats on the horizon, making it all the more imperative that agencies enforce proper identity and access management (IAM) practices. In order to better measure the current state of IAM at the state and local level, Government Business Council (GBC) conducted an in-depth research study of state and local employees.

    Download
  • Sponsored by Aquilent

    The Next Federal Evolution of Cloud

    This GBC report explains the evolution of cloud computing in federal government, and provides an outlook for the future of the cloud in government IT.

    Download
  • Sponsored by Aquilent

    A DevOps Roadmap for the Federal Government

    This GBC Report discusses how DevOps is steadily gaining traction among some of government's leading IT developers and agencies.

    Download
  • Sponsored by LTC Partners, administrators of the Federal Long Term Care Insurance Program

    Approaching the Brink of Federal Retirement

    Approximately 10,000 baby boomers are reaching retirement age per day, and a growing number of federal employees are preparing themselves for the next chapter of their lives. Learn how to tackle the challenges that today's workforce faces in laying the groundwork for a smooth and secure retirement.

    Download
  • Sponsored by Hewlett Packard Enterprise

    Cyber Defense 101: Arming the Next Generation of Government Employees

    Read this issue brief to learn about the sector's most potent challenges in the new cyber landscape and how government organizations are building a robust, threat-aware infrastructure

    Download
  • Sponsored by Aquilent

    GBC Issue Brief: Cultivating Digital Services in the Federal Landscape

    Read this GBC issue brief to learn more about the current state of digital services in the government, and how key players are pushing enhancements towards a user-centric approach.

    Download
  • Sponsored by CDW-G

    Joint Enterprise Licensing Agreements

    Read this eBook to learn how defense agencies can achieve savings and efficiencies with an Enterprise Software Agreement.

    Download
  • Sponsored by Cloudera

    Government Forum Content Library

    Get all the essential resources needed for effective technology strategies in the federal landscape.

    Download

When you download a report, your information may be shared with the underwriters of that document.