Boise CPA discusses tax implications of pending Inflation Reduction Act – | Vette Leader

There are differing political opinions as to whether the law will raise taxes for lower- and middle-class Americans, rather than just high-income earners.

BOISE, Idaho – The national conversation continues to focus on the Inflation Reduction Act, you may hear very different conversations depending on which side of the aisle you are on. A key question about the law is whether it will deliver on President Joe Biden’s promise that the law would not levy taxes on people earning less than $400,000. Critics say no, proponents say yes.

To analyze the fact, KTVB spoke to Boise CPA Jeff Beebe, who runs the Beebe & CO CPA Firm, and expects calls and questions from clients soon.

“I will this week. Once it really starts getting everything in the press. I hope people call me,” Beebe said.

A key question he’s likely to get is how will the law affect taxes? Beebe does indeed explain the language.

“Tax rates don’t change under the law, but there are some things for businesses, they increase taxes that they will ultimately pass on to consumers. So while you may not be paying taxes directly, you’re paying more for them,” Beebe said.

RELATED: Here’s what made it into the Inflation Reduction Act and what was cut

While individual tax rates will not change for those earning less than $400,000, the law introduces a new minimum tax of 15% for companies making more than $1 billion in annual profits. The tax is said to focus on about 200 U.S. companies that avoid paying the standard 21% corporate tax rate, including some companies that, through clever maneuvering, end up paying no tax at all. Experts say don’t expect the big companies to bite the bullet when paying new taxes.

“Take Amazon as an example. Very early on, Amazon didn’t make any money for years, but they had a large net operating loss carryforward that they’re using up now that they’re profitable. But it’s still an offset that was legal to use but very unpopular politically. So it’s focused on those businesses or they’re reinvesting large amounts of their income into other things that are deductions that they don’t want all those deductions to come off of,” Beebe said. “You’re not just going to take a hit to the bottom line. They will pass that on to consumers.”

So what could that look like?

“Normally it would be a price increase. It could lower the rate of wage growth, although in our current environment of high unemployment, one mustn’t play around with people’s wages too much. That will translate into price increases,” Beebe said.

While tax rates may not change, low- and middle-income Americans might see costs associated with the new law, but built-in tax credits for things like green energy and electric cars or Medicare benefit expansions are intended to offset the costs.

Beebe says he’s also watching another part of the story, an $80 billion investment in the IRS. The goal is to crack down on dishonest tax returns that are costing the country millions of dollars.

“Well, they’re talking about hiring up to 80,000 people, which will almost double the size of the IRS and will have a big impact on IRS audits. The IRS has a tough job. They are enforcing a very unpopular law. Everyone understands that the government needs money to function. They just don’t want it to be their money. They want it to be someone else’s money,” Beebe said.

When the IRS has more resources, it is likely that more audits will be conducted to reduce lost IRS tax revenue.

“They estimate underreporting by individuals is $250 billion. It’s much bigger for some individuals and businesses or payroll taxes. And who is this supposed to go to? It will be mostly people making less than $400,000 a year. This is also not a tax increase, because that is the applicable tax law. People won’t pay it and the IRS will try to collect it. It’s going to focus on people making less than $400,000 because there are more of those people than over $400,000,” Beebe said.

Join The 208 Conversation:

KTVB is now on Roku and Amazon Fire TVs. Download the apps today for live news broadcasts and video-on-demand.

Download the KTVB mobile app for breaking news, weather and essential stories at your fingertips.

Sign up for the Daily 7 newsletter: Your Prediction. your commute. your news.

Leave a Comment