As Aretha might say, small business owners could use a little more R.E.S.P.E.C.T. from the I.R.S.
Fortunately there's some good news to report on the respect front. With the tax filing deadlines looming Senator Cornyn (R-TX) announced today that he is introducing legislation to strengthen the rights of small business owners in their dealings with the IRS. The best idea since combining peanut butter with jelly.
My hope is that Senator Cornyn's legislation – The Small Business Taxpayer Bill of Rights Act of 2012 – can garner bipartisan support and actually become legislation in the near future. As a few readers may recall, I wrote in favor of improved taxpayer rights for small businesses a while back – so I'm delighted to see the Senator's good work (and was honored to attend today's announcement of the legislation along with alliantgroup's Vice Chairman Mark Everson (a former Commissioner of the IRS ) who spoke briefly as well).
So what's in the bill? Key provisions include the following:
1) Expanding the number of small businesses that can get attorneys fees when the IRS takes a position in audit that is not substantially justified. Currently, this right is only available for businesses worth up to $7 million. The bill expands that to businesses with $50 million or less in average annual gross receipts. Much better. No longer will businesses have to decide between paying the tax man or their lawyers when the IRS doesn't have its feet on the ground.
2) Strengthen the independence of IRS appeals. Too often we see in our work representing taxpayers that IRS appeals views itself as the “last auditor” as opposed to the first objective independent reviewer of the facts and the law. The legislation will make clear that IRS appeals is not there to come up with new ideas and theories of why business owners should pay more tax – rather, they are there to review and consider the issues and facts put forward by the IRS in its audit.
3) Alternative Dispute Resolution. Our clients that have managed to get to mediation or arbitration have found this to be a good process – reducing costs and time. To their credit, senior management of the IRS has been big promoters of arbitration as well. The legislation will expand the ability of small businesses to take advantage of mediation and arbitration.
4) Increases the civil damages allowed when the IRS recklessly or intentionally – or by reason of negligence – disregards the law and regulations. Goose meet gander.
This legislation will provide important benefits to small business owners in dealing with the IRS. I would say that in discussions with small business owners though, many don't take full advantage of the rights they already have under the tax code—perhaps this will serve as a wake-up call.
Senator Cornyn and his staff have made it clear that this is the opening of a discussion (much needed) and that they welcome the ideas and thoughts of small business owners. What are your ideas?