Bill Would Reduce IRS Penalties For Some Small-Business Owners
By Martin Vaughan, Of DOW JONES NEWSWIRES
WASHINGTON -(Dow Jones)- Tax writers in the House and Senate introduced
bipartisan legislation to ease Internal Revenue Service penalties for some
small-business owners who had invested in tax-shelter employee benefit plans.
Lawmakers on both sides of the aisle have criticized the penalties as being
too harsh. The penalties, enacted by Congress in 2004, apply for failing to
report so-called listed transactions, the kinds of tax shelters the IRS
considers most egregious.
Since that time, dozens of small-business owners have been slapped with
penalties that are in some cases many times greater than the actual tax benefit
reaped by the firms. For instance, the penalty for a single year's violation by
the owner of an S-corporation is $300,000 under current law.
The bill introduced Monday by Democratic and Republican leaders on the Senate
Finance and House Ways and Means committees sets the penalty at 75% of the tax
benefit received. The minimum penalty would be set at $10,000 for corporations
and $5,000 for individuals.
"Our proposal would ensure that tax penalties are in line with the received
tax benefits in an effort to avoid any extra burden on businesses already
strapped in the down economy," said Senate Finance Committee Chairman Max Baucus
(D., Mont.).
"This is an issue of tax fairness and we need to move forward on this bill as
quickly as possible," added Baucus.
The IRS earlier this year said it supports legislation to lessen the impact of
the penalties on small business, and suspended efforts to collect the penalties
until the end of 2009 to give Congress time to act.
The provision could become part of year-end legislation to extend expiring tax
credits for businesses.
-By Martin Vaughan, Dow Jones Newswires; 202-862-9244; martin.vaughan@
dowjones.com
(END) Dow Jones Newswires
11-16-091718ET
Copyright (c) 2009 Dow Jones & Company, Inc.
|