Taxman Knocking on Small Businesses' Doors

In one example of how the federal government is seeking to raise revenue on the backs of small businesses, the next Congress will likely consider repealing LIFO accounting methods. Now, the National Small Business Association has launched an entire website devoted to cataloging other examples of attempts to squeeze more tax dollars out of entrepreneurs. The site focuses on actions the IRS is taking to close the so-called tax gap (the difference between the amount of money the government is supposed to get and how much it actually brings in). The NSBA alleges that the IRS is disproportionately targeting small businesses in this effort, and points out that the last two years have seen a 150 percent rise in audits of small corporations while audits of large corporations are at a 20-year low.

One way to deal with the tax gap without even worrying about what the IRS is up to is to simplify the tax code, removing the various loopholes that have created a gap in the first place. There's also the whole issue of scrapping small business taxes altogether: Jeff Cornwall and Growthology had some thoughts on that subject the other week. I'll be throwing in my own two cents soon.