From the May 2006 issue of Entrepreneur

The IRS is helping and hindering small businesses with two new initiatives. One initiative features four significant fee hikes that went into effect February 1.

  • Requesting a change in accounting method went from $1,500 to $2,500.
  • An opinion letter on employee IRAs, SEPs, SIMPLE IRA and Roth IRA plans went from costing between $125 and $2,570 to costing between $200 and $4,500.
  • The cost of a pre-filing agreement went from a three-tiered price structure with a $10,000 cap to a flat fee of $50,000.
  • The cost of a private letter ruling increased from $7,000 to $10,000, although taxpayers earning less than $250,000 can apply for a reduced fee.

On a more positive note, the agency simplified filing requirements for small employers. Businesses with one or more employees paying wages totaling less than approximately $4,000 a year will no longer have to file quarterly employer tax returns. Instead, they will file a new annual form-Form 944-and make one payment, explains Kevin Brown, the IRS' Small Business/Self Employee Commissioner.

"Eligible employers are those with an estimated annual employment tax liability of $1,000 or less," notes Brown, who says the ruling will reduce the filing burden for nearly 950,000 entrepreneurs. "Replacing four quarterly forms with one annual form is a significant benefit."