We know that an increased budget for enforcement will lead to more audits. More audits mean more tax collection. The question that remains to be answered is exactly how much federal tax revenue the IRS expects to collect with the new Inflation Reduction Act.
How much taxes will be collected with the Inflation Reduction Act?
The Congressional Budget Office recently released a report that estimated the budgetary effects of the Inflation Reduction Act. They expect increased collections of about $203 billion over the next decade. This would raise federal revenue by almost $125 billion during that 10-year period after taking into account the $80 billion cost of the act.
Why is tougher enforcement necessary?
According to the IRS, most taxpayers pay their federal taxes willingly and on time. However, that still leaves nearly $400 billion in uncollected tax payments. They believe that tougher enforcement can help close the tax gap. In other words, stricter enforcement will help lessen the difference between the amount of taxes that is collected, and the amount taxpayers owe.
IRS enforcement, audits in particular, has been less frequent in the last decade. In fact, audit rates have dropped for all levels of income between 2010 and 2019. In fact, a tax return was three times more likely to be audited in 2010 than in 2019. However, this is not due to the IRS becoming more lenient or forgiving. The issue centers around staffing levels and funding. The IRS is expecting the new funding from the Inflation Reduction Act to help balance staffing levels in order to be able to collect more tax revenue.
Are you prepared for increased tax collection?
With increased IRS tax collection approaching, it’s important to be prepared. It’s never too late to seek tax debt relief. Get protected from the stress and burdens that come with IRS tax collection. Give us a call at 800-536-0734 for a free consultation.
More than half of the $80 billion Inflation Reduction Act will be spent on IRS enforcement. This specifically means collecting back taxes, conducting criminal investigations, monitoring digital assets, obtaining legal support and hiring thousands of new IRS auditors.
How many auditors will the IRS hire?
The IRS is looking to hire nearly 87,000 employees over the next 10 years. This is a major increase from its current 80,000 employees. A majority of the new hires will help bring IRS staffing levels back up to par to maintain efficiency. As of now, it remains to be seen exactly how many of the new hires will be responsible for auditing. The IRS will determine the number of enforcement agents they hire.
Who will be audited?
More auditors mean more audits, so understandably taxpayers are wondering if they will be impacted. The U.S. Treasury Department has said that the low and middle-class, as well as small businesses, will not be the focus of the upcoming increased enforcement activity. The IRS is to focus its auditing efforts on high-income taxpayers and large corporations. Specifically it will focus on those that earn more than $400,000 per year. The bill itself includes language that states the goal of the Inflation Reduction Act is not to increase taxes for any individual or entity earning less than $400,000 per year.
Are you prepared for an audit?
All in all, with increased IRS enforcement activity approaching, it’s important to be prepared. It’s never too late to seek tax relief. Let Optima’s team of experts help you get protected from the stress and burdens that come with IRS enforcement. Optima Tax Relief is the nation’s leading tax resolution firm with over a decade of experience helping taxpayers.
Between the inflation, the pandemic, and the Inflation Reduction Act, now is a scary time to owe back taxes. The bill has passed, granting the IRS $80 billion dollars in funds for their activity. Consequently, we’re expecting a massive increase in the agency’s enforcement. Learn how the Inflation Reduction Act will affect IRS spending.
How will the Inflation Reduction Act will affect IRS spending?
Inflation Reduction Act funds will be added on to the annual money the IRS receives from Congress. This will be about $12.6 billion for 2022. Additionally, the 50% increase will be paid across four departments over the next ten years.
More than half of the funds are specifically going toward enforcement activity. IRS enforcement includes collecting back taxes, conducting criminal investigations, legal support, and monitoring digital assets. The other three areas that will also be supported include:
IRS operations- $25 billion for expenses such as rent, printing, postage, and telecommunications.
Customer service- $4.8 billion would be used for updating service technology. A callback service is in the talks.
Taxpayer assistance- $3 billion would go toward filing and account services or other taxpayer needs.
IRS Collections
With a large budget provided by the Inflation Reduction Act, the IRS is expecting to collect roughly $203 billion in federal tax revenue over the span of a decade. The net federal revenue would increase by more than $124 billion.
Government officials are also expecting the tax gap to close. So, the difference between the amount of taxes being collected and what taxpayers actually owe will be closer.
Tax Help for Taxpayers Who Owe
If you haven’t started the process of tax debt relief, it’s not too late. Preparing yourself with a team of professionals that are already working on your compliance could spare you from more penalties, stress, and possibly help you save some money. Optima Tax Relief is the nation’s leading tax resolution firm with over $1 billion in resolved tax liabilities.
From a pandemic to inflation, American taxpayers haven’t been able to catch a break since 2020. To combat the current state of the economy, Senate has passed a new bill with a ten-year plan. The Inflation Reduction Act is being sent to President Biden’s desk, requesting nearly $80 billion to the IRS.
What is the Inflation Reduction Act?
While the funding will support the IRS, this will hopefully bring in more federal tax revenue to offset the cost of lowering prescription medicine and combating climate change. There are plans in motion to accomplish these goals, but federal funding to do so is lacking.
How will the IRS use these funds?
The IRS has been waiting for additional funding for years. In the last ten years, their activities have dwindled, and the agency’s budget decreased more than 15%. While IRS Commissioner Rettig has previously stated that the backlog will be complete by the end of 2022, there are still 11 million unprocessed tax returns.
The IRS will hire more staff and have access to more resources, such as legal representation for larger cases.
Cons
Naturally, more staff and resources for the IRS means more IRS enforcement. This act could trigger more audits for middle class businesses and individuals.
Outcome of the Inflation Reduction Act
Government officials have also stated that the goal is not to go after small businesses, but rather the large corporations and high net-worth individuals with high-end noncompliance.
Senior Fellow at the Urban-Brookings Tax Policy Center Janet Holzblatt was quoted as saying, “The goal should not only be to increase audits, but improve the productivity of audits. You want the IRS to select the businesses and people for audits who really have not been compliant.”
How the Inflation Reduction Act affects people who owe
With more IRS enforcement on the way, it’s better to be safe and get in compliance as soon as possible. Optima Tax Relief is the nation’s leading tax resolution firm with over $1 billion in resolved tax liabilities.
Small business loans can be helpful and sometimes necessary in order to continue or expand a business. There are several types of loans available to small businesses, each with their own sets of pros and cons.
Term Loans
One of the most common types of loans for small businesses, a term loan is a lump sum of funds that is paid back over a fixed term and typically via fixed monthly payments. Interest will be paid on top of the principal balance borrowed. Sometimes it’s at higher rates than those offered by a traditional bank. However, it is a popular loan because funding is quick and it offers opportunities for business expansion.
Small Business Administration (SBA) Loans
SBA loans are offered by banks and lenders but administered by the Small Business Administration, a government agency that provides support to small businesses. Some business owners will prefer this type of loan since it’s backed by the government. It also offers high borrowing amounts at low rates and has long repayment terms. On the other hand, it’s harder to qualify for and it comes with a long and tedious application process.
Business Lines of Credit
Like a regular credit card, a business line of credit gives business owners access to a credit line of a certain limit, which is usually determined by business revenue and credit. Interest is only paid on the money charged, allowing greater flexibility in cash flow. This type of loan may also require paying additional account maintenance fees.
Equipment Loans
Businesses that want to own equipment can look into obtaining an equipment loan, which allows them to pay for business equipment over a specific term. The equipment will then serve as collateral for the loan. Sometimes a down payment is required for this loan.
Microloans
Microloans are small loans usually offered by nonprofits or government agencies and loan business owners up to $50,000. They are popular among startups and businesses located in disadvantaged cities. Some of these loans are accompanied by mentoring or consulting from the loan provider as well.
Invoice Factoring
This service allows businesses to sell their unpaid invoices to lenders to collect on. In return, the business will receive a percentage of the invoice value. This can benefit businesses that are awaiting payment from customers but need cash immediately.
Invoice Financing
Similar to invoice factoring, invoice financing allows businesses to sell their unpaid invoices as collateral in order to receive a cash advance. In this case, the business is still responsible for collecting payments from their customers in order to repay the amount financed.
Tax Debt Relief for Small Businesses
There are several loan options available to small businesses, whether they are a startup in need of fast cash, or an established business looking to expand. It is essential for small businesses to ensure that they are compliant with all tax laws in order to keep their business going. If you need tax help, give us a call at 800-536-0734 for a free consultation today.
