STATEMENT
of the
 Honorable Nydia M. Velazquez, Chairwoman
United States House of Representatives, Committee on Small Business
Full Committee Hearing: “Entrepreneurs and Tax Day:  How IRS Policies and Procedures Impact Small Businesses”
April 14, 2010

Washington, DC – Rep. Nydia M. Velázquez (D-NY), the Chairwoman of the House Committee on Small Business, delivered the following statement today at a hearing entitled “Entrepreneurs and Tax Day:  How IRS Policies and Procedures Impact Small Businesses” :

“With Tax Day now just hours away, most Americans are wrapping up their paperwork, looking forward to 12 months without touching a W2.  For many small business owners, however, the process is still underway. The weak economy, along with a series of new tax measures, has compounded its historic complexity, making the process of filing a small business tax return especially challenging.

“This is not the first time our committee has met to discuss the tax challenges facing small firms. In the past, small businesses have told us that complexity is the most stubborn of those obstacles. With good reason -- entrepreneurs face more than 200 IRS forms and schedules. The process of navigating this maze of regulations is not only complex, it is expensive and time-consuming. Businesses with fewer than 20 workers spend roughly $1,300 per employee on tax compliance and, according to one IRS study, up to 80 hours. At a time when many businesses are struggling, every hour counts and so does every dollar.

“This afternoon, we will discuss the role that the IRS plays in helping entrepreneurs meet their tax obligations, and examine the agency’s management of certain Recovery Act tax incentives.

“Last year, Congress passed one of the largest and most sweeping tax cuts in U.S. history. The Recovery Act incorporated $15 billion in relief for entrepreneurs, including provisions to not only put cash back in their pockets, but to increase demand for their products, such as the first-time homebuyers tax credit. Now, we need to be asking whether or not those refunds -- and their resulting economic boost -- are being dispersed effectively. With the economy still struggling, it could use a fresh influx of circulating capital, and it is critical that the IRS do everything it can to stoke -- rather than restrict -- our economic recovery.

“But as one study recently found, that isn’t happening. Since 2005, the agency has increased its small business audits by 30%. Meanwhile, audits of large companies dropped 21%. I understand that, in light of our nation’s fiscal constraints, closing the $345 billion tax gap is critical to our long-term prosperity. But so are small businesses. These are the companies that create 70% of new jobs, and will play a leading role in rebuilding our economy. Any effort to increase our tax base must be done in a way that is responsible, fair and not unduly burdensome to small businesses.

“Small firms should be able to look to the IRS as an ally -- not an enemy.  Given the myriad of available small business schedules and incentives, entrepreneurs need to know they can count on the IRS to address their concerns quickly and answer their questions accurately. The agency’s move to increase staff levels within its Small Business/Self Employed program should be a important step in delivering those resources, and I was pleased to see  Commissioner Shulman place a greater emphasis on small firms overall. In this afternoon’s conversation, we will discuss the improvements he’s made and look to see if more can be done.

“Tax law operates most effectively when small businesses have certainty and stability, and now is the time for policies that deliver both. Now is the time for incentives that encourage would-be entrepreneurs to start up, and existing businesses to expand.  With the proper tools, America’s small firms can strengthen the economic recovery that is currently underway, and spark the job creation we are waiting to see.”

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