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STATEMENT

Congresswoman Nydia Velazquez, Ranking Member

Committee on Small Business

Hearing on the Internal Revenue Service and Small Business

Wednesday, July 17, 2013

One of the focuses of this committee is to ensure small businesses are given the tools to comply with regulations without increasing their costs.  No place is this more true than when it comes to taxes.  In the past, small businesses have told us that complexity and uncertainty create difficulty when filing tax returns.  Many business owners worry that one simple mistake can lead to a costly and timely audit.  And, at a time when many businesses are striving to expand, every hour and dollar counts.

Small firms spend up to 67 percent more on tax compliance than their larger competitors and face constant changes to the tax code, creating further confusion and hindering job creation. They should not also have to face intense scrutiny from the IRS through business audits.  Nevertheless, audits of small businesses – particularly pass-through companies – continue to rise.

While the vast majority of small business taxpayers comply with tax laws, it seems they may be under increased scrutiny by the IRS – all because a few bad actors misreport their income. Seeing as our nation’s fiscal constraints are an ongoing priority, I understand that closing the $450 billion tax gap is critical to our long-term prosperity.  But so are small businesses.  Any effort to increase tax compliance must be done in a way that is responsible, fair, and not unduly burdensome to small firms.

I’m grateful the IRS Commissioner took time out of his schedule to testify before us today but it’s unfortunate we are turning a relevant topic into political theater.  It is my hope we can move past the unsubstantiated belief that the IRS politically targeted certain small firms.  And instead have a productive discussion to ensure small businesses are not unfairly harmed by overzealous auditing.

Today’s hearing will give us a better grasp of the amount and scope of small business audits.  Since it is necessary to have an accurate picture of enforcement policies, I’m looking forward to learning about the factors considered in deciding on an audit and about the average result.  I believe this data is even more important right now as the agency seeks to be more efficient due to financial realities.We will also discuss whether the private costs and burdens of an audit are contemplated and thereby justified in light of potential revenue gains of an audit.  This hearing also allows us to examine what is being done to minimize these burdens for small entities.

Small firms should be able to look to the IRS for help in answering questions quickly and accurately.  For this reason, it is vitally important that we encourage better taxpayer service.  The agency’s move to increase staff levels in its taxpayer assistance program is an important step in delivering those resources, and I am also pleased to see a greater emphasis on ACA education activities.With the proper tools, America’s small firms can sustain the economic growth currently underway by investing in their operations without fear of an onerous audit.

With that, I’d like to thank Commissioner Werfel for being here today.

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