A coalition of Senate Republicans has raised alarms over an Internal Revenue Service (IRS) compliance unit, which they argue may be unfairly targeting small businesses across the United States.
In a letter addressed to the Trump administration on Tuesday, Senators Marsha Blackburn of Tennessee, Steve Daines of Montana, James Lankford of Oklahoma, and Senate Majority Whip John Barasso of Wyoming voiced their concerns regarding the unit, which was instituted under the Biden administration.
The senators expressed their apprehensions to Deputy Treasury Secretary Michael Faulkender, seeking clarification about the IRS pass-through compliance unit that operates within the Large Business and International division.
They stated, We are concerned that this initiative, established under the previous administration, appears to have been motivated by ideological considerations rather than the principles of sound tax administration. The lawmakers further questioned whether the unit's focus was genuinely on enhancing compliance or if it was targeting specific business structures based on "institutional prejudice."
As reported by American Military News, the senators highlighted the challenges faced by small businesses, which often lack the resources to manage intensive audits. They warned that such audits could impose "disproportionate compliance burdens" on these businesses. The letter also referenced assurances given to taxpayers earning under $400,000 that they would not experience increased enforcement beyond historical levels.
The IRS pass-through compliance unit, which was established during the final months of the Biden-Harris administration, has been a point of contention. According to The Daily Caller, former IRS Commissioner Danny Werfel defended the unit's creation, asserting that it was designed to ensure accountability among the nation's wealthiest filers.
Werfel stated, We are honing-in on areas where we believe non-compliance among our wealthiest filers has proliferated over the last decade of IRS budget cuts, and pass-throughs are high on our list of concerns. He emphasized that the unit would utilize Inflation Reduction Act funding to address efforts by large partnerships to exploit pass-throughs to evade taxes.
The Republican senators' concerns underscore a broader debate about the balance between effective tax enforcement and the potential for overreach, particularly when it comes to small businesses. As the IRS continues its efforts to address tax compliance, the scrutiny from lawmakers highlights the need for transparency and fairness in the agency's operations.
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