President Donald Trump recently signed into law the Taxpayer First Act. This law results in “an overhaul” of the Internal Revenue Service (IRS). One change that will affect small business owners: the RESPECT Act.
What is the RESPECT Act?
This portion of the Taxpayer First Act curbs the IRS’ ability to utilize civil forfeiture, or the federal confiscation of property without first establishing the presence of a crime.
What led to the change?
The IRS can confiscate cash if it believes the business is participating in criminal activity. The Bank Secrecy Act allows the IRS to confiscate transactions over $10,000. However, the agency can also confiscate smaller amounts if it believes the business is breaking down these transactions to stay under their radar — a process referred to as structuring.
The Treasury Inspector General for Tax Administration stated the IRS had primarily used these laws against legal enterprises, sometimes devastating local businesses. In fact, 91% of the reviewed cases showed no connection to illegal activity.
What does this mean for small business owners?
Small business owners can find themselves facing unfair tax demands. In these situations, the demands may be more than just unfair, the may be a violation of your rights. Lawmakers wrote the RESPECT Act to help curb these efforts, but the IRS may still wrongly apply tax law against entrepreneurs.
Business owners who find themselves facing such allegations from the IRS are wise to seek legal counsel to better ensure their rights are protected. The attorneys with Goldburd McCone are familiar with these issues and can represent your interests when facing the IRS.