by KEVIN DUNN
Recent polling has shown that U.S. small-business confidence is on the rise. There is a renewed sense of economic optimism rolling across the country. And why not? Positive economic data paired with a new Administration focused on eliminating red tape for job creators is a welcome relief to business owners everywhere. This sentiment is being felt right here in South Carolina.
But before we get too excited, there is still a lot of work to do to fix the many problems coming from Washington, D.C., that have been undermining economic growth right here at home. At the top of this list should be the IRS.
The latest move by the IRS is a perfect example of how out-of-touch federal agencies are with the realities of running a business.
Rather than improving its outdated systems, the IRS is imposing new, complex rules that create unnecessary burdens and costs for business owners who already comply with the law.
The IRS’s latest rule was enacted during the last week of the Biden Administration. It targets lawful basis-shifting transactions — an essential tool for businesses structured as partnerships. This change is not about closing loopholes or stopping fraud; it’s about punishing law-abiding taxpayers with more paperwork and harsher penalties. The rule forces businesses to disclose information the IRS already possesses, shifting the burden of proof onto taxpayers and treating them as guilty until proven innocent.
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This bureaucratic overreach isn’t just a headache — it’s a direct threat to businesses in South Carolina. Our state has over 400,000 small businesses employing more than 800,000 workers. These businesses don’t have armies of accountants and lawyers like massive corporations do. For them, the IRS’s new rule is a costly distraction that diverts resources away from hiring workers and expanding operations.
Instead of using the $80 billion it received from Congress to modernize its outdated processes, the IRS is doubling down on aggressive enforcement. The agency’s inefficiency has become our problem. If the IRS were serious about tax compliance, it would fix its internal systems instead of offloading its failures onto taxpayers.
Making matters worse, the IRS has also created a special pass-through audit unit, which operates independently from its traditional audit teams. This unit has been described as politically motivated, targeting business owners who use lawful tax strategies that Washington bureaucrats don’t like. The result is a confusing and inefficient process where businesses are stuck dealing with multiple IRS teams that don’t communicate with each other, leading to delays, conflicting information, and wasted time. There’s a simple way to start fixing this mess: eliminate the IRS pass-through audit unit. This unnecessary and politically driven task force embodies the worst of government overreach. Disbanding it would be a quick and easy start to ending the IRS’s weaponization against taxpayers.
President Donald Trump has already taken action to rein in federal agencies through executive orders aimed at ending politically motivated enforcement. Congress must now do its part by ensuring the IRS is held accountable. South Carolina’s elected officials, including Senators Lindsey Graham and Tim Scott, should take a stand against this unfair rule and demand the IRS focus on efficiency instead of targeting small businesses.
South Carolina’s economy thrives when businesses have the freedom to grow without unnecessary government interference. The IRS should not have unchecked power to impose rules that harm small businesses and discourage investment. It’s time for lawmakers to rein in the agency, roll back this burdensome regulation, and ensure the IRS serves taxpayers, not the other way around.
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ABOUT THE AUTHOR …
Kevin Dunn is a graduate of the University of South Carolina and has owned Kevin Dunn Insurance & Financial Services Inc. in Greenville since 2008. Prior to that, Kevin worked with many small businesses around the state with Dunn & Bradstreet following a stint with Coca-Cola. He most recently ran as a Republican for S.C. House District 35.
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