The Inflation Reduction Act of 2022, the much-awaited legislation from the federal government, part of the Biden Administration's big promises. I told everybody about this back in September and what it meant for the IRS. “Supersizing the IRS” as I like to call it, it’s sending funding for 87,000 new IRS agents.
What does the Inflation Reduction Act or “IRA'' have in it? The thing that's most important, I think as far as my clients are concerned, is that it is “supersizing” as I mentioned, and it's a possible weaponizing of the IRS. You decide. It's $80 billion to “supersize” the agency with 87,000 new IRS employees or agents that comes out to roughly $919,000 per new agent. So, there’s plenty of funding there to staff up the IRS and accomplish what they want to accomplish, which is to the stated goal, to get after the fat cats, the tax evaders, the big corporations that are not paying any taxes to go ahead and “poke the bear” when it comes to class warfare. And as I said, it’s to weaponize the IRS. The question that comes to mind is, you know, is the IRS worthy at this point of such a juicy set of funding? Right now they're answering 19 to 20% of incoming calls at the IRS.
That has been brought to the attention of Congress by the Taxpayer Advocate. There's also only 53% of IRS employees actually going into the office at this point. You be the judge of that. Do they deserve more money to improve that or keep that up? Well, regardless, it's coming. As we go down this list here to be fair, some of this does go to things other than just bulldog enforcement of the IRS and here here's what they are:
Some of the money goes to updating old school antiquated technology. I just imagine some people with those big Gordon Gekko cell phones that cost like a hundred dollars a minute and old school fax machines with the scroll paper that goes in there being used still at the IRS. Supposedly some of this is going to update some of that antiquated technology. $403 million of it goes to buying the IRS a fleet of cars, including chauffeurs for those cars. The IRS already has a whole fleet of cars for agents in the field. So, more cars are coming. $50 million of the money goes to spending the $80 billion, which I'm not really sure how that all works, but they, they need more money in order to spend the money that they're getting. And the biggest share $49 billion of the $80 billion goes to enforcement. That means audits, criminal investigations. I'm sure you've probably seen somewhere on the news, the job descriptions for criminal investigations that's being used to kind of shock the conscience here. The job description for those agents says you must be physically fit essentially handy with a firearm and not have any real problem working 50 hours a week or using deadly force when it comes to tax enforcement. The purpose of all this, like I said, is to supposedly get all the uber wealthy tax cheats and big companies to pay their fair pay their fair share.
But here's my two cents on all this: The big corporations, the targets supposedly of all this “supersizing,” already have plenty of resources to fight the IRS and are doing so effectively as we speak and have been doing so for many years. I think what the maybe unintended result of all this is saddling small business and middle class with more audits. Those are typically the low hanging fruit for the IRS. They don't necessarily have all the endless resources to fight them. And so, what are they going to do? These small businesses and consumers that get hit with more audits; they're going. to shoulder the largest percentage of the burden of this new weaponizing “supersizing” of the IRS.
Here's the other stuff that's in there: First of all, the goodies, the tax credits. There's a $7,500 tax credit for new electric vehicles, but be careful with this one as there's limits on price and there's limits on income. I think it's $150,000 per individual, $300,000 per joint return. So that's where you're going to cap out on electric vehicles and some of these other programs that I'm going to mention. It's a $4,000 credit for used electric vehicles. That $7,500 was for a new and $4,000 for used. There's a 30% tax credit for solar panels with wind energy installation costs. There are 30% credits for other types of environmentally friendly repairs or additions to your home, including windows, water, heaters, doors, and skylights. There's also $14,000 per taxpayer rebate for efficient appliances. And you can look at all those things on the interwebs, if that interests you. Here's the tax downside: the tax hikes that will occur because of all the “IRA”, the Inflation Reduction Act. Will ultimately reduce inflation? Who knows? There's going to be a 15% minimum tax on large corporations, ones with billion dollars or more in the last three years.
There's going to be an alternative minimum tax. There's a floor of what they must pay of 15%. They still get to deduct some things, but way less than they currently are. There's a $6.5 billion natural gas tax, which will likely increase household energy bills. There's a $12 billion crude oil tax, which will likely increase household energy bills. There's a $1.2 billion coal tax, which will likely increase household energy bills as well. There's a $74 billion stock tax, which is aimed primarily at restricting stock buybacks. Now, keep in mind though that the biggest part of the corporate stock market rests in 401ks. And that's going to apply buyback restrictions on your run of the 401k. There is a 95% federal excise tax on American pharmaceutical manufacturers who refuse to place or who refuse to accept the federal price controls that are coming down on pharmaceuticals.
There's a $52 billion tax hike on pass-through businesses with declared losses. And this is really for manufacturers, retailers and other capital-intensive businesses that see significant losses, that's losses $250,000 or more due to wages, rent, new equipment inventory, and interest payments. And I've said it before, but I'll say it again. It looks like all the stuff that we've been getting, primarily in 2020 when it came to government goodies, is all being walked back, and the big payback is on. It's time for the Treasury Department and the federal government to get even. Here's the light at the end of the tunnel though, and I try to say this as often as I can, and I'll say it again here. The fresh start initiative is still around. If you owe taxes, you can still use the fresh start initiative.
Those are things like the Offer in Compromise program, certain types of installment agreements, like the Partial Pay installment Agreement. We're seeing those things go through really with less scrutiny than we have in the past. But those departments at the IRS that are in charge of doing administration of the fresh start initiative are still up and going and you should take advantage of them before these 87,000 new IRS people take their positions. There's also still money in the Employee Retention Tax credit. That's for employers, small businesses that kept their doors and their employees going and open and paid during the pandemic and beyond. So if you haven't looked at that lately, the rules have changed over the course of time since 2020. So, if you looked at it before and you weren't a possible candidate, then you may be a candidate now. Once again, get on this thing before these 87,000 new enforcement and other IRS employees hit the street.