How will this inflation relief Act impact you and your taxes?
Troy, United States – December 8, 2022 / Marketing House Media LLC /
The very thought of inflation can send chills through an economy. When inflation — a steady increase in prices that impacts the cost of living — gathers momentum, it can be difficult to contain. Often, when prices rise, the change is temporary in nature. But when inflation takes hold, the government will consider stepping in with inflation relief measures. With the persistent rise in prices over the last two years, the U.S. government has felt increasing pressure to act. Enter: the Inflation Reduction Act of 2022.
But, like many bills passed through Congress, the Inflation Reduction Act of 2022 has many components. Far from focusing on interest relief alone, the government bill covers several agenda items. Most of the bill’s spending, for example, is aimed at Energy Security and Climate Change. Many taxpayers, however, are most interested in the bill’s tax implications.
As a start, the Inflation Reduction Act of 2022 will make changes to tax policies and tax credits. Perhaps more pressing, for many taxpayers, is knowing the IRS is about to receive a substantial increase in funding. Naturally, this news opens the door to many questions.
Will you become the target of increased IRS enforcement? Will you be held accountable for taxes in arrears? Will new IRS enforcement mean greater intrusion on your business?
Knowing the IRS is about to step up its enforcement efforts, you are likely wondering if you should take action to protect yourself and your business. Let’s take a closer look at how the Inflation Reduction Act of 2022 could impact you and your business.
Inflation is a tricky thing. While a certain amount is expected over time, a sudden rise in prices can leave economists and policy-makers wringing their hands.
Over the last few years, however, several factors — including the pandemic, labor shortages, supply chain issues, and the war in Ukraine — have created a perfect storm for inflation.
The U.S. government has reacted with interest relief measures. But the Inflation Reduction Act of 2022 does more than offer interest relief.
To understand better, let’s dive into the details of the Inflation Reduction Act of 2022.
Introduced as an amendment to the Build Back Better Act, the Inflation Reduction Act of 2022 will raise $737 billion and authorize over $437 billion in spending.
On the surface, this bill will raise more funds than it plans to spend, offering support to those who need inflation relief the most. Among the well-advertised elements of the Inflation Reduction Act of 2022 are:
But there is far more to this bill. Tax-related line items include changes to tax policies and tax credits, including those that will impact business owners, corporations, and taxpayers in higher income brackets.
The item that raises concern for many, is the $124 billion expected to be raised in IRS tax enforcement. With such a substantial revenue goal, surely the IRS will come after more taxpayers.
If the news of increased IRS enforcement makes you nervous, you are not alone.
Taxpayers and business owners across the country are wondering if they will now be targeted by the IRS. The Act delivers approximately $80 billion to the IRS over 10 years, with $46 billion earmarked for enforcement.
Many questions have yet to be answered — how will this money be distributed?
While the government has already stated an increase in funding for taxpayer services — helping U.S. taxpayers find the answers they need — it is unclear how additional funds will be allocated amongst departments for audit, enforcement or technology.
One clue is the government’s intention to increase “digital asset monitoring and compliance activities”.
This idea can strike fear into the hearts of taxpayers. With increased monitoring and enforcement, are they about to find themselves in the crosshairs of the IRS?
While some of these answers will take time, let’s take a closer look at some of the business tax details outlined in the Inflation Reduction Act of 2022.
Whether you own a small business or work for a larger corporation, the Inflation Reduction Act of 2022 has specific tax implications that you’ll need to understand:
In short, the Inflation Reduction Act of 2022 has produced a wide range of tax implications, in addition to the increase in IRS funding, making it critical for taxpayers and business owners to stay on top of any potential tax problems.
To stay ahead of increased IRS activity and reach, it is important to have a strong handle on your taxes. If you or your business are in tax arrears or have been having tax problems such as IRS tax notifications or missed payments, it is important to clean house as quickly as possible.
The sooner you can properly assess and understand the extent of your tax problems the better you will fare, should the IRS come looking for money. Whether the IRS boosts its staffing levels, updates its technology or streamlines operations, it will have additional resources to go after those who owe money to the government.
The best thing you can do, for your financial well-being and your peace of mind, is to secure an expert team of tax professionals, to help you organize and prioritize your taxes. By taking the first steps to make things right, you will not only feel more in control of your taxes, but you could also look more favorable, should the IRS take you into their line of sight.
Unfortunately, many questions about the Inflation Reduction Act of 2022, will only be answered in hindsight. In the short term, the best thing you can do is turn to a team of tax experts.
At Franskoviak Tax Solutions, we have helped our clients with tax planning for more than 30 years. We provide comprehensive tax services with first-class expertise and a personalized, boutique-style approach. Speak to our team about personal and business taxes, payroll taxes, IRS tax relief, and tax problems such as IRS tax notifications, payroll tax debt, delinquent taxes and more.
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