Monday, August 22, 2022

Tweet of the Day- Marsha and the IRS

Blackburn claims 

I've heard from so many people in our creative community, they're in the music industry, they're authors, they're very concerned about this because they know that they're organized as an LLC and pass through entity. Their gross is much higher than what their actual income, their profit is and they know that these are audits that are going to be coming to them.

A pass-through limit, the Limitation in Excess Business Losses, was originally enacted in the Republican Party's 2017 tax law, the Tax Cuts and Jobs Act, and was scheduled to expire after 2025. It was extended by a year in the American Rescue Plan, signed by President Biden in 2021.  The Inflation Reduction Act would extend it two years.

According to senior fellow Steve Rosenthal at the Urban-Brookings Tax Policy Center

The provisions hurt “rich guys” who were using business losses to take tax write-offs against bonuses, salaries and investment income....

The limitations can theoretically apply to any pass-through business that runs up a big operating loss each year. But real estate businesses — which can use rules around depreciation to consistently rack up big losses on paper — are likely among the most affected categories, according to Jeffrey Levine, a certified financial planner and certified public accountant based in St. Louis.

“It’s a really big deal for uber-wealthy people with a ton of real estate, and then the occasional business that loses a ton of money every year,” said Levine, who is also chief planning officer at Buckingham Wealth Partners.

Of the $80 billion for the IRS in the Inflation Reduction Act, only $45.6 billion is designated for enforcement.. And the 87,000 number probably is considerably exaggerated because it

appears to come from a 2021 Treasury Department estimate of the level of hiring needed to maintain IRS efficiency and keep up with retirements and other staff declines. However, the actual number of new IRS agents that will be hired because of the Inflation Reduction Act remains to be seen.

However many new agents are hired, the IRS has

an estimated $600 billion “tax gap.” (The tax gap is the difference between what people owe in taxes and what they actually pay.) To do that, the agency plans to focus on high-earners, large corporations, and complex partnerships. That’s potentially good news if you’re a household making less than $400,000 a year or a small business. But, if you are wealthy, you could see some increased audit activity in the coming years. Although, it’s hard to know what higher audit rates will look like, partly because IRS audit rates have historically been low.

That's bad news for Marsha Blackburn and her donors from the corporate sector, including those of real estate, who have contributed $829,787 to her from 2017 to the present.  However, she does get to frighten her constituents, and the satisfaction of knowing she has.


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