Small businesses, freelancers fear IRS agents will target them first: Hurts ‘the smallest among us’

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After the Congressional Budget Office reported that 78 to 90% of revenue from new audits under the Inflation Reduction Act will come from families making less than $200,000 per year, freelancers and small business advocates are voicing concerns they’ll be the IRS’ main target.

“I think this is the easiest way for the Biden administration to penalize those who work independently because they’ve tried and exhausted congressional means,” freelancer and Independent Women’s Forum Senior Fellow Gabriella Hoffman told Fox News Digital.

“It’s going to hurt the smallest among us,” she continued, “those who just want to get by economically or maybe are trying to find alternatives with COVID, with the Great Recession and what is now called the ‘Great Reshuffling.’”

Former investment banker and “The War on Small Business” author Carol Roth also told Fox News Digital that the IRS’ targeting of small businesses began last year with the American Rescue Plan.

“I can tell you it’s not the wealthiest people, billionaires who are triggering a $600 Venmo aggregate set of transactions in a year or selling $600 on eBay,” Roth said. “That is squarely in the middle class and probably to some extent the lower class.”

On average, those who identify as self-employed make less than $70,000 per year, according to recent data from ZipRecruiter. Fox Business confirmed last week that the bipartisan CBO informed lawmakers that audits of taxpayers making under $400,000 accounts for about $20 billion in revenue within the Inflation Reduction Act, which was signed by President Biden on Tuesday.

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Hoffman said the IRS’ recent $80 billion funding and beefing up of 87,000 additional agents will “affect a lot of people” working for themselves or small businesses.

“The burden will largely fall on independent workers, independent contractors, freelancers, anyone who comprises the gig economy, because they see them as this kind of uncharted workforce, kind of a wild workforce that has to be reined in,” Hoffman explained. “They think that we don’t pay enough in sufficient taxes, although we are paying more than our share.”

“The War on Small Business” author and former investment banker Carol Roth argues the Inflation Reduction Act beefing up the IRS intends to keep taxpayers “dependent on the government.” (Getty Images)

Roth raised a “red flag” that IRS agents could specifically target e-commerce businesses, too.

“Anybody who is selling online who has been left alone, whether or not you have a business but particularly if it is kind of this side-hobby business, I think people are going to be shocked to find out that they’re flagged and they’re probably not going to have the right records in place,” Roth warned.

With freelancers paying a 15% self-employment tax on top of state and federal taxes, Hoffman believes the IRS enhancement is being used as a tactic to “scare” Americans away from independent work.

“They can’t try to regulate us out of existence. Maybe they’ll make it more painful to us to work in such a framework that some people may say, ‘Heck with it. I will go back to being a W-2 employee. I can’t surrender this much in taxes,’” Hoffman noted. “For [the IRS], it’s about accruing more revenue.”

According to Roth, the Inflation Reduction Act’s enforcement of IRS agents intends to keep Americans dependent on the government.

“I do think that this is the continuation of trying to make people more dependent on the government, because the reality is, taxing is meant to influence behavior,” Roth said. “So going after more taxes from productive businesses means that you want those businesses to do less, to fare worse.”

Mentioning possible cases where the IRS may make a discrepancy or honest mistake, both policy experts argued that freelancers or small businesses don’t have the time or money to dispute claims.

“It may just be easier to pay the penalty and make it go away than have to spend more time and effort trying to fight it,” Roth said. “For a small business owner, that time is money. A lot of them are wearing multiple hats and that’s just taking productive time away from their business.”

“I think we have to be on high alert,” Hoffman cautioned, “and hopefully it won’t have to lead us to have to look for preemptive legal counsel. I don’t ever want to have to think of hiring a lawyer.”

Both experts expressed additional worries that the Biden administration is weaponizing the IRS to punish entrepreneurs and wealth creators.

“It’s just this vicious cycle of, ‘What can we continue to do to handicap this portion of the economy that isn’t centralized, that isn’t giving us lobbying dollars, that doesn’t benefit us?’ We see this in every action and it is deliberate,” Roth said.

“As we all very well know, people who create businesses, even corporations and smaller businesses, too, they’re making money and it passes down to those who they hire,” Hoffman said. “I think the Democratic Party, they don’t really listen to the concern of voters in these high inflationary times… You don’t tax and you don’t spend when people are hurting economically.”

The power behind tax policy, Roth pointed out, is that it can be changed or repealed, but it’s up to voters to act early and show support for politicians who back independent workers and small businesses.

“When the next group of people who have some level of common sense get put in place, they need to come in, and the very first thing they need to do is repeal this,” Roth suggested. “And then from there, they really need to focus on simplifying the tax code. The fact that we all have to do this crazy dance is insane.”

“I think that’s what voters are looking to: to put a check on this administration to stop them from attacking independent workers, and also these third-party vendors, too,” Hoffman added. “A lot of people see that small business interests are not being represented under this administration.”

Reps. Elise Stefanik, R-N.Y., Henry Cuellar, D-Texas, and Michelle Steel, R-Calif., had proposed a bill in July protecting the expansion of flexible and independent work, which has only been introduced to the House.

White House Council of Economic Advisers member Jared Bernstein previously explained on “America’s Newsroom” how the IRS’ funding and staff hiring aims to catch cases of tax evasion, not tax “avoidance.”

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“I think what’s gotten confused in some of this discussion is that finally reversing the long-term defunding — which is, really, in my view, a shadow tax cut for wealthy tax evaders — will not increase audits one iota,” Bernstein had said.

“What the Inflation Reduction Act does is it enforces paying your taxes for the wealthiest taxpayers,” Bernstein told co-hosts Bill Hemmer and Dana Perino. “And I don’t think anyone, including you two, would object to that contention.”

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FOX Business’ Hillary Vaughn contributed to this report.



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