The current tax and audit regime is changing. Taxes are going up for those making more than $400K and for corporations. On top of that, more funding is going to the IRS to increase their capacity to audit and collect. These are the developments over the last month that you need to know.
The current tax and audit regime is changing. Taxes are going up for those making more than $400K and for corporations. On top of that, more funding is going to the IRS to increase their capacity to audit and collect. These are the developments over the last month that you need to know.
This is his taxes made simple. The only podcast that gives you the tax information you need without going too far into the weeds, regulars to this podcast will recognize that it's been about a month since our last episode. And well, a lot has happened. Most of it centers around a growing target on the upper middle class and wealthy as well as corporations in the form of increased taxes and audits. Let's face it with all of the federal spending going on right now, the government needs revenues and they know that they're not going to get that from the 95%. So they're going after the 5% who comprise about 37% of the gross income reported to the IRS each year. And this figure is believed to be an understated or rather under-reported figure, which ultimately drives a significant amount of the United States tax gap, which is estimated to be greater than $1 trillion by commissioner Chuck Redick, hence more audits. It was inactive well with a democratic administration that felt compelled to raise taxes, to pay for unprecedented spending over the past year and spending yet to come. So I'm going to give you a list of the things that have developed over the last month that you should be aware of. If you are an affluent individual and, or a business owner. Number one, the IRS, this is getting substantial funding to double their workforce over the next decade in a push to raise $700 billion from audits and other enforcement over the same time period that would put them at about 180,000 employees in total. Currently, the likelihood that you have been audited for your 2019 tax return. It's about one in 650, although that number will go up because the statute of limitations is still open for 2019 for the most recently closed ACCE. Or however, that rate was about one out of 175 audit rates are going to go way up for those with more opaque sources of income. AKA income other than W2 or 10 99 as the IRS estimates that 72% of the misreporting comes from those with more complicated tax returns. The bottom line is that you've got to have your I's dotted and your T's crossed now more than ever before. Number two, the IRS has updated its guidance on how employers will claim tax credits for the Cobra premiums that they are being mandated to pay for certain departed employees. The credit is claimed on form nine 41, which is the quarterly payroll tax return. If you have a payroll company that will work with you on this, you can actually retain withholding taxes in anticipation of claiming the tax credit. Number three. And this one I'm kind of happy about, you know, somewhat selfishly there is a push to regulate tax repairs that are not CPAs EAs or tax attorneys. In general, if you're using an unlicensed prepare, you should just do the return yourself. But if it's too complicated to do yourself, then you should use a licensed preparer. You can check if your prepare is licensed easily through a Google search, unlicensed preparers, give the tax prep industry a bad name. So don't be lured in by a low fee. They don't charge much because they're largely in competent, harsh, but true. Number four cryptocurrency transfers worth over $10,000 will be reported to the IRS likely starting in tax year 2021. Number five, the step-up in basis for those who inherit assets from the deceased is under attack. Current law allows the beneficiary to inherit the asset with a tax basis of its fair market value at or around the date of death. The current push is to make it so the basis remains what it was in the hands of the deceased, AKA much lower. This would create a much larger tax bill when the asset is eventually sold. Number six, the current belief is that higher capital gains taxes and other increases in taxes for those making over$400,000, which I've talked about at length before will go into effect in 2022. But we should have more clarity next week when Biden releases his budget for the government's upcoming fiscal year, this will happen on May 27th. Some of these increased taxes could easily go into effect for 2021. So don't sleep on this number seven, the restaurant revitalization fund will stop accepting applications. This coming Monday, the 24th and the paycheck protection program has run out of funding. Number eight treasury secretary. Janet Yellen has proposed a 15% global minimum tax in order to prevent us corporations from offshoring their profits to more favorable tax jurisdictions. So, yeah, a lot is on the table here, as I've said before, the importance of tax planning in the here and now, and really over the next couple of years will be crucially important because a lot of these changes are ticking time bombs and the taxes you'll pay. If you're caught holding the bag are going to be much more painful than they used to be. So I'd like to thank you for tuning into TMS or taxes made simple if you're not into the whole brevity thing, because there's TMI and then there's TMS. And if you enjoy this podcast, please give us a review on whatever podcast catcher you use. It would mean a lot to me, seriously, a lot. And if you don't enjoy this podcast, please don't leave us a review because I'm very emotionally fragile and I just can't handle it anyway. We'll see you then for real.