In August of this year President Joe Biden passed the Inflation Reduction act. While not a massive overhaul of the tax code the act did include updates to the tax code and extensions/ revisions of programs that were about to expire. While for the majority of people the act will change very little, your clients may be able to take advantage of expanded clean energy incentives. However with a 15% tax increase on corporate earnings some of your clients, especially if you do taxes for businesses, could be paying a little more this year. Let’s explore the changes you can expect.
Going Green:
The Inflation Reduction Act includes tax credits for clean vehicles, alternative energy, and energy saving appliances. The new Clean Vehicle Credit provides a tax credit up to $7,500 when purchasing a new electric vehicle. For more information on the green energy tax credits available to your clients ready out article, How Going Green Can Save Your Tax Payers Money.
Healthcare:
Premium Tax Credit benefits will continue for those with income 400 percent above the federal poverty level ($12,880 for individuals and $26,500 for families). This is a credit which those who fall under the previously mentioned income level can claim when they purchase health insurance through the marketplace.
Corporations:
Corporations that make over 1 billion dollars will be charged a 15% tax as well as a 1% tax on the value of repurchased stock.
How will this affect you as a tax preparer?
With a 63% increase in the IRS’s budget it seems likely that the tax preparation industry will be affected in some way. However until the IRS revealed how this budget will be allocated within the organization it’s impossible to tell. With new blogs every week consider subscribing to our newsletter and be the first to know.
Program Enforcement:
Additional annual spending for “program enforcement” is included in the Inflation Reduction Act. This includes Schedule C filings, self-employment, and stock issues.
Technology Improvements:
$450 million has been allocated to “core technology improvements.” The IRS claims this will be used to better capture inconsistencies in tax filings and improve IRS softwares.
Higher Income Enforcement:
The most significant change and one that may affect your clients (depending on their annual salary) is the $4.5 billion towards hiring additional auditors and legal staff focused primarily on taxpayers with income over $400,000.
Conclusion:
No matter what changes the IRS makes you can trust SwiftFP to have your back. Not only can we provide you with the best and most affordable professional tax software on the market, SFP Works, but when you partner with Swift you also gain access to our years of experience in the tax industry. So don’t go through another tax season alone. Partner with SwiftFP for software solutions, tax industry news, and more!
