The IRS is the agency within the Treasury Department charged with enforcing tax law. It is organized into four divisions, one of which is the Small Business/Self-Employed (SB/SE) Division.
Overview of the SB/SE Division
This division of the IRS serves about 54 million taxpayers, comprised of:
- Individuals filing Schedule C, E, F, Form 2106 or Form 1040
- Small C or S corporations and partnerships (and limited liability companies filing partnership returns) with assets under $10 million
Thus, the SB/SE division handles start-up, part-time and full-time businesses with and without employees. It also covers individuals owning rental properties or farming businesses and employees reporting employee business expenses. Finally, the division handles individuals who invest in businesses (partnerships and S corporations) and small C corporations.
The division not only covers income taxes, but also employment taxes, excise taxes, estate and gift taxes and international tax issues. What’s more, the SB/SE division oversees all penalties, of which there are now more than 150 civil penalties. These include such penalties as those for late filing of returns or paying taxes, the failure to timely provide information returns, such as W-2s and 1099s, and the failure to timely deposit employment taxes.
The mission of the SB/SE division is to “help small business and self-employed taxpayers understand and meet their tax obligations, while applying the tax law with integrity and fairness to all.”
Small Business and Self-Employed Tax Center
The IRS has a landing page where small businesses and self-employed individuals can learn about their tax responsibilities and find links to needed forms and resources. For example, new businesses can apply online for an employer identification number (EIN).
The online center provides links to webinars as well as live local workshops where small business owners and self-employed individuals can use to learn even more about specific topics. For example, some webinars in the past year include the tangible property regulations, S corporation shareholder basis and general employment tax issues.
There is also an A to Z index, from the Affordable Care Act to the work opportunity tax credit and workshops for small business.
The chief function of the IRS is to collect taxes. The SB/SE division provides information about filing and paying business taxes. This includes electronic payment options, such as through the Electronic Federal Tax Payment System (EFTPS) and information about estimated taxes. There is extensive information about employment taxes for small businesses, including descriptions of what employment taxes are all about, deposit and return obligations and e-filing.
Affordable Care Act Mandates
The SB/SE must see that self-employed individuals within its purview have complied with the individual shared responsibility requirement to have minimum essential health coverage or pay a penalty. Similarly, it must ensure that applicable large employers, or ALEs (those with 50 or more full-time and full-time equivalent employees) are complying with employer mandates. This year, for example, ALEs must furnish Form 1095-C to employees detailing the extent of their company health coverage, if any. Smaller firms with self-insured plans, such as health reimbursement arrangements, must issue Form 1095-B.
To facilitate the transmittal of copies to the IRS, the IRS now has the Affordable Care Act Information Returns (AIR) Program. Employers filing 250 or more returns annually (>250 W-2s) must file the information returns electronically through the AIR Program. Smaller employers can voluntarily do so.
Early Interaction Initiative
In trying to help taxpayers comply with their tax obligations, the SB/SE division is now using early intervention for employment tax deposits. Thus, the SB/SE is monitoring deposits of small employers and when a deposit is missed, the IRS is following up with a reminder letter. The purpose is to keep these employers from becoming delinquent on their obligations when it is possible to remain current despite a business’s financial problems. Last year, the SB/SE division sent about 6,000 of these letters; it expects to issue about 10,000 letters this year.
The SB/SE is looking to begin correspondence audits online through a secured portal. The IRS and taxpayers will be able to communicate through the portal. For example, the IRS will send a taxpayer an email that it has posted communication in the portal. The taxpayer then logs into the portal to read the communication. The communication within the portal may, for example, tell a taxpayer that income from Form 1099-MISC was not included on the return, so that he or she can self-correct (i.e., pay tax on the omitted income) without having to file an amended return. The taxpayer will also be able to send communications to the IRS through the portal.
Looking ahead, the SB/SE division is trying to find ways to improve taxpayer services, as well as transform the way in which it conducts enforcement. As taxes move more and more into the digital age, the array of service options offered by the SB/SE division to small businesses and self-employed individuals can be expanded while continuing to provide in-person service when needed.