“We do not have the resources to go after the bigs or the superbigs, as we refer to them, and we get outgunned routinely in that space,” Rettig said.
About 0.3% of corporate tax returns filed in 2018 were audited, according to the IRS. That’s down significantly from its 2010 1.4% audit rate.
Biden proposed giving the IRS an additional $80 billion over the next 10 years to ramp up the agency’s audit and enforcement divisions to go after tax cheats in his Build Back Better plan, which is stalled in the Senate.
Two lawmakers asked Rettig about the IRS’s backlog for processing employee retention credit (ERC) claims, which they said hurts small businesses.
Rep. Carol Miller (R-W.Va.) said some employers claiming an employee retention tax credit from as long ago as the first quarter of 2021 are still waiting to receive it.
Kevin Hern (R-Okla.) asked Rettig if he would halt automated taxpayer notices and provide penalty relief for ERC claimants on 2022 filings of payroll tax returns.
Until that happens, “what this means is taxpayers are paying taxes on income they have never received," Hern said. "Not only are small businesses liable for the tax on reduced wages, but [they] are also liable for the safe harbor on their estimated taxes, which is inflated due to the reduced wages."
Rettig did not answer Hern’s question, but said the IRS has suspended a number of automated notices and that taxpayers or their representatives could always ask for penalty reductions or elimination.
Separately, 100 lawmakers sent Rettig a bipartisan letter asking him to identify what notices the IRS has still not suspended. They also want to know why the “Notice of Underreported Income” has not been suspended.
The IRS previously identified 10 notices it had suspended, admitting in some cases it had issued them without knowing if taxpayer returns were in the agency’s unprocessed backlog. The agency said, however, that it lacks the authority to suspend any more notices.