Small Business Taxpayer Compliance: Breaking Barriers to Resolution

This paper examines small business taxpayer compliance by analyzing the barriers to compliance with the Internal Revenue Service (IRS) and the discussion and resolution process. Through the lens of the theory of tax morale, we explore common factors that contribute to reduced compliance intention. Using small business taxpayer cases, we will highlight and summarize the underlying penalty code sections that most commonly relate to tax issues experienced by small business owners. By analyzing existing IRS protocols for resolution, we will discuss their application to the actual cases to discover ways to simplify and encourage quick, painless resolution. We hope to share knowledge of procedural options that have become increasingly important as the façade of the “kinder, gentler” IRS is eroding. The purpose of this paper is to demystify resolution options and to aid small business taxpayers in understanding their options for resolving conflicts with the IRS. We also aim to send a message to the IRS that, to increase compliance, procedures, and processes should be manageable and understandable by taxpayers rather than being prohibitive.