It’s TaxQuips time from TaxMama.com® .
Today TaxMama® wants talk to give you some basics about the new Inflation Reduction Act. And some observations.
By now, you are aware that President Biden has signed the Inflation Reduction Act into law. Although there are 273 pages to this Bill, only a few issues may affect you directly. I will give you more details about this Bill in the next couple of weeks. Meanwhile, here are the highlights:
- Extending the Premium Tax Credits (buying insurance through the Marketplace and having the government pay part of your premiums) for another 3 years
- Increased tax credits for alternative fuel vehicles
- Increased tax credits for more energy efficient homes and commercial properties
- For those small businesses involved in qualified research activities, the research credit has doubled, and can be used to reduce payroll taxes.
The Bill also adds a corporate Alternative Minimum Tax of 15%. But that only applies to corporations with a BILLION DOLLARS of book income, or more.
Please excuse this editorial comment about all the screaming I have heard about how this tax will be passed on to consumers in higher prices:
A corporation with a BILLION DOLLARS of profits, that has to pay out $150 million dollars, still gets to keep $850 MILLION dollars of profits. Isn’t that enough? Why do they need to pass on the cost of the additional taxes to consumers?
Are you worried about the $80 billion going to the IRS and the 87,000 new IRS agents being hired?
Please don’t. Let’s face it, right now, it’s practically impossible to reach someone at the IRS on the phone. The fact is, the IRS provided only a 19.5% level of service, according to TIGTA (the agency that audits the IRS). Paper mail and tax filings of any kind are delayed for months because the IRS doesn’t have the staff to process all that input.
And did you see this Washington Post article (with pictures) about just how handicapped the IRS paper processing is? So, a lot of the new hires will be for areas like this – they won’t be field operatives. Many will be providing customer service and answering phones calls. This is for our benefit.
Sure, there will be more audits coming up. But the IRS cannot afford to initiate audits that don’t generate revenue. They just don’t have the staff. So expect the audits to focus on taxpayers that are likely to have under-reported their income, or inflated expenses or the basis for their sales. They simply don’t have the staff.
Unfortunately, the IRS must still some statistical audits as part of their National Research Program. I say unfortunately because those are line-by-line audits of people who were randomly selected. There is no way out of this one. (Although the Taxpayer Advocate did once suggest that some of these people get paid for this hardship.)
And the fact is, even if they agree to hire 1,000 people each day – it will take about 6 months for the federal background check by the Office of Personnel Management (OPM); then several more months for training. New hires are not likely to be effective this year.
But even before those hires, using current staff, the IRS is going back out into the field to collect unpaid taxes from business that are behind on payroll and business taxes. And Revenue Agents (field auditors) are heading out to hold examinations at the taxpayers’ places of business. Ideally, they will have notified the taxpayer or the representative of the impending visit. If they have not, and you are not absolutely certain that the person at your door IS from the IRS, you have the right to ask that the meeting be moved to an IRS office, so you can make sure they are not scammers. (More about this in next week’s post)
Incidentally, there are no new taxes on taxpayers – not even those earning $400,000 or more. Even so, with the marriage penalties in the current law, some couples might want to think about getting a divorce for tax reasons. Read this article in Think Outside the Tax Box. (Only partially tongue-in-cheek.)
And remember, you can find answers to all kinds of questions about taxes and business issues, and EA Education, free. Where? Where else? At http://iTaxMama.com/AskQuestion
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