New IRS Commissioner Daniel Werfel is touting the results from 175 audits of high income taxpayers to make the case for additional IRS funding. These audits occurred in the past few months resulting in the collection of an additional $38M in unpaid taxes.
The majority of the cases hinged on the favorable tax treatment given to residents of Puerto Rico who pay no federal taxes at all and only a 4% tax on their income. Qualifying for this tax treatment can be difficult.
One of the rules necessary to establish residency is to live on the island for at least six months and a day during a given tax year. This is an easy thing to check given flight records and credit card bills.Tax cheats have long used this tax haven to illegally reduce their taxes.
House Republicans reduced IRS funding this year by $1.4B. Another $20B was cut in the next two fiscal years.
Only time will tell if Commissioner Werfel’s efforts will have any effect.
Let me leave you with this.
The Biden Administration announced another plan to forgive $39B in student loan debt for 804K borrowers in the coming weeks. This is after their last attempt was nullified by a Supreme Court Ruling.
Many are asking whether or not this would increase their taxes. Under normal circumstances, forgiveness of debt creates an economic enrichment to the taxpayer and is an income taxable event.
However, if this attempt actually occurs, it won’t be taxable at the Federal Level. The American Rescue Plan Legislation made this a non-taxable event.
But it may be taxable at the State Level. This will depend on where your tax home is established and the individual laws of that state.
We’re all going to get through this. Let’s get through it together.
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