Speak Up! How Tax Laws Affect Your Business Matters
Watch Out Family Business Pass-Throughs, The IRS Is Flexing Its Muscle with New Funding and Big Targets
The Internal Revenue Service is not fooling around.
With its billions in new funding, our U.S. tax department is hiring, investigating, and collecting. The big targets include “complex pass-through entities,” which unfortunately make up over 80% of America’s family businesses.
The $60 billion the IRS received under the Inflation Reduction Act has put thousands to work on new audits. Be prepared for a knock on the metaphorical door.
There are a few easy marks.
The first audit wave is focused on complex pass-through entities, but they are also zeroing-in on high-flying private jet users and high-wealth earners with those complicated tax structures and partnerships. Of course, big non-filers and non-payers are first up on the IRS hit list.
Of the new billions in funding, over $45 billion is slated for enforcement on high-income individuals and corporations with “complex tax filing and high-dollar non-compliance.”
You might remember back in September 2023 the IRS announced its goal of hiring 3,700 IRS agents to expand its workforce. It’s happening. They’ve also bought new technologies and are using AI tools to go after non-payers. The IRS even established a new unit called the “Large Business and International (LB&I) Division” to focus specifically on large, complex pass-through entities.
One thing is certain: the audits are coming, and there is no escape. Federal Reserve Chair Janet Yellen even announced the only way out of IRS crosshairs is to make less than $400,000 in annual income.
One IRS sore spot is the personal use of business aircraft. Personal versus business spending by these high-flyers is not easy to track down, the IRS admits it, even with a bit of humor, as IRS Commissioner Danny Werfel’s statement says about this:
“Personal use of corporate jets and other aircraft by executives and others have tax implications, and it’s a complex area where IRS work has been stretched thin. With expanded resources, IRS work in this area will take off. These aircraft audits will help ensure high-income groups aren’t flying under the radar with their tax responsibilities.”
As a start, the IRS is sending compliance letters to 25,000 individuals with incomes exceeding $1 million and to over 100,000 individuals with incomes between $400,000 and $1 million. High net worth “non-filers” have the biggest bullseye on their backs, especially those who have not filed federal income tax returns since 2017. In addition, the agency has initiated examinations of 76 large partnerships across various industries.
It’s no surprise the IRS is focused on tax evaders, especially those earning $1million or more annually, and have a tax debt of $250,000. So, far the IRS has recovered $520 million from this group.
As Commissioner Werfel says, “this is just the beginning.”
If your family business is structured as a pass-through entity you may want to tighten up your accounting, because this time the IRS doesn’t seem to be fooling around.
Apropos of this, the next Congressional Family Business Caucus is scheduled for Sept. 18 on Capitol Hill. The focus of this meeting is “Enterprise Structure,” specifically pass-through entities, as well as expiring tax legislation from the Tax Cuts and Jobs Act.
If you’re interested in attending and having your voice heard contact us at: [email protected]
We hope you’ve enjoyed this article. While you’re here, we have a small favor to ask…
As we prepare for what promises to be a pivotal year for America, we’re asking you to consider becoming a supporter.
The need for fact-based reporting of issues important to family offices and successful individuals and protecting a lifetime of savings has never been greater. Now more than ever, family offices and successful individuals are under fire. That’s why Policy and Taxation Group is passionately working to increase the awareness of issues important to family offices and successful individuals, while continuing to strengthen our presence on Capitol Hill.
Policy and Taxation Group is the Voice for Family Offices and Successful Individuals in Washington, DC focused exclusively on the critical tax and economic policies that impact them.
Since 1995, Policy and Taxation Group has been the leading advocacy group working to reduce and eliminate estate tax, gift tax, and generation skipping transfer tax while blocking increased income tax and capital gains taxes, the creation of a wealth tax, and other hostile tax policies that punish hardworking taxpayers and success.
#incometax #taxseason #federaltaxpolicy #taxation #EstateTax #Deathtax #wealthtax #taxLegislation #CongressionalCaucus #CapitalGainsTax #incometaxrates #incometaxseason #taxrefund #taxreturn #incometaxreturn #gifttax #Generationskippingtax #InheritanceTax #repealestatetax #FamilyBusiness #promotefamilybusinesses #familyowned #supportlocalbusiness #womeninbusiness #AdvocatingForFamilyBusinesses #Generationallyowned #Multigenerationalbusiness @FamilyEnterpriseUSA @PolicyAndTaxationGroup @DitchTheEstateTax #FamilyEnterpriseUSA #PolicyAndTaxationGroup #DitchTheEstateTax