With the monumental legislation for the Inflation Reduction Act currently in the House, there is a lot of information floating around on mainstream media and social media about the itemized list of changes that will be coming once this is passed. Are you aware of everything that has been packed into this bill? Let’s take a look. I will focus on the one piece of the proposed legislation that has many Americans scared.
This bill will extend $80 billion dollars to the IRS to provide reinforcements, compliance, modernization of the current system, and so forth. More than half of those funds will be dedicated to enforcement. “The IRS is a key part of the government, but not one you usually associate with law enforcement and guns.” 2 In fact, the IRS will be bringing on 87,000 new agents. One of the line items in the job posting basically states that the applicant must be willing to bear arms and implement force if needed. The IRS actually snapped up $700,000 in guns and ammunition in 2022.
Please note: if the IRS Criminal Investigation Division Special Agent comes to visit you, it is advised that you speak with your attorney. You are not protected from being implicated once you speak to said agent. You are NOT obligated to speak to said agent, so a word of caution.
Everyone from the White House to the key players in the drafting of this bill insist that no family earning less than $400,000 annual income will be affected by the tax increases; but is that really the reality of what to expect? “[T]he IRS’s prolific enforcement capabilities — which bring in on average better than $10 in revenue for every $1 spent pursuing audits — are often trained on the most economically vulnerable taxpayers. More than half of the agency’s audits in 2021 were directed at taxpayers with incomes less than $75,000, according to IRS data. More than 4 in 10 of its audits targeted recipients of the earned income tax credit, one of the country’s main anti-poverty measures,” according to Jacob Bogage of the Washington Post. 3
If the top corporations earning $9 billion or more are now set to be taxed at 15% corporate tax rate, many economists and tax experts believe this will severely trickle down to the small business owners, farmers, and families earning under $200,000 annually. Regardless of whether these experts are correct, the increased power given to the IRS will not include the automatically changing tax hikes when the 2018 Trump Tax Reform sunset clause stops on December 31, 2025. This will be an increase as much as 9% going from 24% to 33% for earners over $250,000 annual income. In other words, taxes are on SALE now, and you can take advantage of shifting assets and paying the lower tax rates now and reinvesting in alternatives that will grow tax free. This is the best advice any financial professional should give to his/her clients.
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For a full text summary of the bill, read here: 1 https://www.democrats.senate.gov/inflation-reduction-act-of-2022 (This is the Democrat viewpoint of how this bill will work.
However, this Forbes article by Robert Wood is an interesting perspective of the reality of what is likely to happen.) 2 https://www.forbes.com/sites/robertwood/2022/08/08/irs-has-guns-inflation-reduction-act-will-unleash-tough-irs-on-taxes/?sh=f44ab7f5d201
The Washington Post also has some pertinent information that may be beneficial to clearly understanding the implications if this bill passes.