With inflation surging in 2022, the federal government is desperate to help struggling Americans find some semblance of relief. Their solution? The Inflation Reduction Act of 2022.
This legislation takes a comprehensive approach, with everything from clean energy initiatives to deficit reduction on the table. The act also includes several noteworthy tax changes, as outlined below:
Corporate Minimum Tax
In addition to giving the IRS a major funding boost, the Inflation Reduction Act makes a clear effort to keep businesses from dodging corporate taxes. This takes the form of a 15 percent corporate minimum tax rate, which applies to corporations with annual profits exceeding $1 billion.
Specifically, this rate will involve corporations’ ‘book profits,’ which are made public to shareholders. These book profits are often higher than those reported to the IRS.
In the event that total taxes paid to fail to reach 15 percent, businesses will be expected to pay extra taxes until their effective worldwide rate reaches that benchmark. While there are a few exceptions, this new rule should prevent major corporations from getting away with paying next to no taxes.
The new corporate minimum tax may have a limited impact on everyday taxpayers, but the implications of funding increases could be far-reaching. Ramped-up audits and collections are possible, as the Inflation Reduction Act includes a funding boost of nearly $80 billion over ten years.
While IRS Commissioner Charles Rettig insists that this funding will “absolutely not” be focused on increasing “audit scrutiny on small businesses or middle-income Americans,” many taxpayers are nervous.
No matter how the changes from the Inflation Reduction Act play out, you’ll want an enrolled agent on your side when you run into trouble with the IRS. Our team at the Highland Tax Group has your back. Contact us today to learn more.