Ernst accuses IRS of 'witch hunt' against small businesses with audit proposal

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FIRST ON FOX: Sen. Joni Ernst is accusing the Internal Revenue Service (IRS) of launching a "witch hunt" against small businesses over the agency’s plan to spend the $80 billion granted by President Joe Biden’s Inflation Reduction Act.

"Now is simply not the time to place unnecessary burdens on our small businesses as they continue to grapple with recent economic challenges," Ernst wrote in a letter sent Tuesday to IRS Commissioner Daniel Werfel. "Instead of commencing on a witch hunt on small businesses by enhancing audit rates without justification, we should focus on tax solutions that promote small business growth and economic competitiveness."

Ernst sent the letter on Tax Day, the deadline for millions of American adults to file their taxes with Werfel’s agency. Her warning suggests that small business owners in America could face an even bigger headache next tax filing season with the IRS's new enforcement plan.

Ernst specifically cited a provision that suggests businesses making more than $400,000 per year could be subject to increased "enforcement activities" by the IRS, a threshold that Ernst said is lower than any other industry standard for a "large business."

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Sen. Joni Ernst, R-Iowa, sent a letter to the IRS on Tuesday about its new plan to spend Inflation Reduction Act money (Photo by Patrick Semansky-Pool/Getty Images) (Photo by Patrick Semansky-Pool/Getty Images)

The senator demanded that Werfel provide more clarity on how the IRS proposal would be implemented, such as whether the $400,000 figure references net income or the business’s revenue.

She also questioned Werfel on what guardrails are in place, if any, to protect small businesses "from potential data breaches by criminals and foreign adversaries."

"It is not clear by which precedent the IRS determined that a large business is any entity earning more than $400,000 in revenues. Under this approach, enhanced tax enforcement efforts would sweepingly apply to small businesses across the country," Ernst wrote.

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She addressed it to Daniel Werfel, commissioner of the Internal Revenue Service (IRS)

Data from the U.S. Census Bureau show that a small business with about five employees would bring in more than $424,000 on average, the senator pointed out.

The IRS rolled out its plan months after Democrats passed their massive climate-and-health care package late last year that granted it the $80 billion to hire thousands of new IRS employees over the next decade. Both the president and Treasury Secretary Janet Yellen have repeatedly vowed that the money would not go toward increased audits for middle and low-income Americans, or anyone making less than $400,000 per year.

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Treasury Secretary Janet Yellen has vowed that the money would not go toward enforcing audits on Americans making less than $400,000 per year (Tom Williams)

But according to Ernst, the IRS appears to be signaling that it would target small businesses under a provision that reads, "The IRS will increase enforcement activities in other key areas where audit coverage has declined while complying with Treasury’s directive not to increase audit rates relative to historical levels for small businesses and households earning $400,000 per year or less."

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"It is abundantly clear that small businesses will bear the brunt of these enforcement efforts; not solely large corporations and the wealthiest taxpayers," she wrote.

Fox News Digital reached out to the IRS for comment but did not immediately hear back.