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Inflation Reduction Act Passed with Massive Federal Tax / IRS Implications

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Inflation Reduction Act Passed with Massive Federal Tax / IRS Implications

 

Just this month, Congress moved forward with a massive legislation overhaul that will impact many areas of government, including in how taxes are treated and how the IRS will go about assessing and civilly and criminally enforcing them.

The bill itself is over 700 pages long and contains several new initiatives and massive funding increases for the IRS, which it will use to try to close the tax gap by any means necessary. It would be logical to expect an increased level of audit and criminal tax investigatory activity from the federal government, which will impact those at all economic levels but especially taxpayers making over $400,000 a year.

Our Dual Licensed Tax Attorneys and CPAs are waiting for your call. Learn more about how the Tax Law Offices of David W. Klasing can help you by calling us today at (800) 681-1295 or clicking here to book a reduced rate initial consultation.

Democrats Pass $700 Billion Bill that Features Large Budget Allocation for IRS

On August 7, 2022 the U.S. Senate passed a legislative package, which is being referred to as the “Inflation Reduction Act.” The package is expected to total over $700 billion. The bill was voted along party lines, with Vice President Kamala Harris voting to break the 50-50 deadlock. The bill touches on many areas of importance to Democrats in Washington, including clean energy, health care, and federal tax reform.

The passage of the bill was a critical step in President Biden’s domestic agenda after the administration had failed in earlier efforts to garner the support of Democratic Sens. Joe Manchin of West Virginia and Kyrsten Sinema of Arizona.

“Today, Senate Democrats sided with American families over special interests, voting to lower the cost of prescription drugs, health insurance, and everyday energy costs and reduce the deficit, while making the wealthiest corporations finally pay their fair share,” Biden said in a statement. The bill must now be passed in the House of Representatives before it goes to Biden’s desk for signature.

Last Minute Adjustments Pushed the Bill Through

The actual passage of the bill through the Senate required negotiations that carried on throughout the night. Just two amendments during what is called “vote-o-rama” were added to the bill after Democratic leaders earlier struck agreements needed to get Sinema and Manchin on board. Under budget reconciliation rules, the legislation only needed a simple majority for passage rather than the usual 60-vote threshold.

Independent Sen. Bernie Sanders of Vermont pushed an expansion of the child tax care credit and other progressive changes to the legislation but was defeated repeatedly as Democratic leaders argued the bill needed to remain intact in order to secure those two votes from Manchin and Sinema. The amendment on the child tax care credit, which expired in December, was shot down, in a vote of 1-97.

Effects of the Bill on Taxpayers and the IRS

Among other results of the legislation, the federal government hopes to impose stiffer corporate taxes and bolster Internal Revenue Service enforcement to bring in more than $400 billion in new revenue over 10 years.

The bill would give the IRS a total of $79.4 billion in funding. Of those funds, $46.5 billion would be given to add 87,000 new IRS jobs to help with tax enforcement and update technologies to enforce taxes on digital assets such as cryptocurrency.

The IRS would also get $25.3 billion for operations support, and $3.2 billion would go toward taxpayer services such as education and filing services. The agency would also get $4.8 billion to update its business systems.

Many Republicans objected to this, such as Collins who added an amendment to prohibit the hiring of 87,000 IRS jobs, unless those workers are back in the office and not working remotely.

“Due in large part to lax telework policies, however, the IRS has consistently failed to provide taxpayers with the service they should expect,” Collins said in a statement.  “As a result, tax refunds have been unacceptably delayed, and four out of five phone calls from taxpayers go unanswered.”

Though Collins and others emphasize improvement in the IRS’ service to taxpayers as a function of the legislation, the side that they are not saying out loud is what may affect you most. To recoup their investment in the federal tax watchdog, the government is counting on more audits and more thorough investigations that lead to fines, penalties, and criminal convictions.

Talk to the Tax Law Offices of David W. Klasing Today

To learn more about what you should expect from the IRS in the coming months and years, schedule a reduced-rate consultation with our Dual Licensed Tax Attorneys and CPAs at the Tax Law Offices of David W. Klasing by calling (800) 681-1295.

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