Act to Reduce Inflation: For Small Business Owners
The Inflation Reduction Act: What Is It?
After further protracted talks, Congress approved a $739 billion spending measure that addresses several problems in the areas of taxation, climate change, and health care. President Biden’s administration scored a significant win with the passage of the Inflation Reduction Act.
The Inflation Reduction Act was approved by the Senate through the budget reconciliation procedure, which required the support of all 50 senators who were Democrats as well as Vice President Harris’ vote to break a tie. The act was approved by the House by a party-line vote of 220-207. The bill has several provisions that have an impact on people, corporations, and small businesses.
What Does the Inflation Reduction Act Do?
The plan allots more than $300 billion for energy and climate reform, which covers infrastructure for renewable energy sources, electricity production, and transportation. Tax credits are provided in this section of the law for energy-efficient home improvements. As well as electric vehicle purchases.
The Inflation Reduction Act also attempts to lower the cost of prescription medications. The federal health secretary would be able to negotiate the cost of some medications for Medicare each year. The bill adds a three-year extension to healthcare subsidies under the Affordable Care Act. And caps out-of-pocket costs for prescription drugs for Medicare beneficiaries at $2,000 per year.
The establishment of a 15% minimum tax on businesses with incomes of $1 billion or more is a crucial component of the legislation. Which is anticipated to generate more than $300 billion in revenue. Despite being eventually closed, the carried interest tax loophole was replaced by a 1% excise tax on stock buybacks.
The fact that the Inflation Reduction Act allows for a bigger IRS is something that many families and small business owners ought to be concerned about.
What Impact Will the Supersizing of the IRS Have on Small Business Owners?
The allotment of $80 billion to the Internal Revenue Service is another crucial component of the measure that has received extensive media coverage (IRS). This amount is six times the federal agency’s current annual budget.
While the additional funds for the IRS will be used for a variety of jobs (such as customer service representatives, IT specialists, support staff, etc.), technology upgrades, and general modernization. It’s important to note that $45.6 billion of the $80 billion is designated for enforcement purposes.
“Some estimate the $46 billion for an army of auditors may allow the IRS to hire as many as 87,000 new agents.”, states Senate Finance Committee Ranking Member Mike Crapo (R-Idaho).
Democrats claim that there are 78,000 employees at the IRS right now. Half of whom will be eligible for retirement within the next five years. Regardless, giving the tax collecting agency extra staff to conduct more audits isn’t exactly good news. Especially for the middle class and small company owners.
With Audit Defense, Safeguard Your Company
Increasing the IRS’s budget by six will certainly result in a higher chance of audits for persons of all income levels and tax brackets. However, it is impossible to predict exactly how this will affect individuals and small businesses.
Schedule C filers have every right to be concerned about an increased chance of an audit. Since they currently face twice as much of a danger as non-schedule C taxpayers. An audit notification is the last thing a small business owner needs when they have limited resources.
Audits can be time-consuming, expensive, and energy-intensive. They can also be quite serious. Have a strategy in mind for how to handle an audit notification if you find yourself the recipient of one. You’ll have a group of licensed tax experts at Your Part Time Accountant that are prepared to protect your interests and represent you in interactions with the IRS.
In collaboration with you, we will create an action plan, a communication plan, and the required paperwork and documentation. The most essential thing is that we’ll make sure your rights as a taxpayer are always respected.