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The IRS recently completed a full-scale reorganization in an effort to make its service more taxpayer-responsive.
The system of dividing taxpayers by geographic region has been replaced by four categories classifying taxpayers by specific groups that have common needs: individual taxpayers, small-business owners and the self-employed, large and midsized businesses, and tax-exempt and government entities. The small-business/self-employed division (SB/SE) is headquartered in New Carrollton, Maryland. It oversees more than 45 million taxpayers who are self-employed or small-business owners who have assets of less than $5 million.
The new division is just starting to offer improved service for entrepreneurs, says Jim Dougherty, director of tax controversy for accounting firm Deloitte & Touche LLP in Washington, DC. One positive step is the pre-filing unit, Taxpayer Education and Communication, which provides publications and other services to help entrepreneurs comply with tax laws. The IRS also plans to have interactive capability on its Web site to direct entrepreneurs to the proper IRS outreach person for their region.
The rest of the small-business division is made up of Customer Account Services and Compliance. The customer account unit processes tax returns, payments and refunds and answers questions on customer-account and tax-law inquiries. The compliance division is designed to improve small-business tax compliance by explaining taxpayer responsibilities after filing returns.
Education for taxpayers about their tax liability is a welcome change, says Mike Dolan, KPMG's national director of IRS policies and dispute resolution. He says education and out-reach were often an afterthought in the past. "Now the small-business division has an organization that does nothing but worry about creating partnerships with every sort of small-business constituency group it can find, as well as the tax preparers and payroll companies that serve small businesses to make sure [entrepreneurs] understand the tax laws." As part of this effort, SB/SE offers customized publications. "If you are starting a technology company, you won't get the same IRS information that the owner of a 7-Eleven gets," notes Dolan.
The IRS has also taken steps toward simplifying the small-business tax process. It recently changed monthly tax deposit requirements for about 1 million small companies. (For more details, see March's "Tax Talk.")
Another new development is on the compliance side. More and more, the tax agency is expected to compare filings with tax data already on file when searching for potential tax problems, says Dolan. That means fewer line-by-line tax return examinations and fewer inquiries from the IRS about supplying tax data. But when the service decides to audit a small-business owner, it will have a much better overall understanding of the income that should go on the return. Then it will be harder for owners to fudge examinations, Dolan predicts. It's taken a while for the IRS to set up the new divisions, but Dougherty says entrepreneurs are bound to feel the effects of a service that intends to be more responsive to their needs.
|Tax Relief Ahead?|
A bill recently introduced by Sen. Christopher Bond (R-MO) could be good news for entrepreneurs. The bill would provide 100 percent deductibility of health insurance costs for self-employed individuals, repeal the Alternative Minimum Tax over five years, repeal the federal unemployment surtax, permanently extend the research and experimentation tax credit, and increase the deduction for business meal expenses. The measure appears to have bipartisan support, which makes its passage likely. Stay tuned.
Joan Szabo is a writer in Great Falls, Virginia, who has reported on tax issues for more than 14 years.