Senate Lobbyists working on the new administration’s tax increases are reporting that they have been successful in reducing about 75% of the increases. Since the ultimate bill is yet to reach the floor of either house, we can only speculate as to what those changes might be.
Policy concerns seem to be the argument of the day. Many have argued that a tax increase would slow the U.S. recovery from the C-19 recession, putting an already fragile economy into jeopardy.
The increase in Cap Gains on taxpayers earning more than $1M in a given tax year from 20% to 39.6% is also running into difficulties. Many are advocating for the increase to be 28% instead.
Many are balking at the step-up-in-basis rules on the estate tax. This is where whether the asset is sold or not, the beneficiary must still pay tax on the increase in the value of the asset upon inheritance.
Some are arguing, and rightly so, that this would imperil small business owners who would like to pass their businesses on to their children. Many have said that this would be the end of the family farm, given the fact that most farms would need to be sold, just to pay the inheritance taxes.
The increase on corporate tax rates from 21% to 28% is in jeopardy as well. Many are saying that this will further stall the economy, by hurting a company’s ability to compete internationally.
Overall, most sources are reporting that the tax hike will go from $3.5T to only $1T.
If the two houses don’t give the new administration the tax hike they propose, that will put their entire new spending agenda in peril. Without the money, very little will probably pass. In this inflationary period, few will be willing to radically increase any deficit.
Either way, we’ll find out more when the new bill reaches the house floor. That could come as early as next week.
Let me leave you with this.
A new client came to us a couple of weeks ago with a substantial payroll problem.
They were with a smaller national payroll company that went into bankruptcy. The last several months that it operated, the company tried to cover it’s losses by not making it’s customer’s payroll tax deposits.
Many of the clients didn’t realize this until months later, when they started receiving delinquency notices from various taxation agencies. The problem is that there are very few remedies available to the client.
As the bankruptcy goes through the system, any money left over will certainly go to the outstanding payroll tax liability. The problem is that after the lawyers are done, there will probably be nothing left to distribute.
There is no hardship that the client can claim to avoid paying the outstanding tax, interest, and penalty. It is completely unfair and unreasonable, but the government has always held that the ultimate responsibility for making payroll tax deposits belongs to the trustee, not the service.
If those deposits aren’t made, whether it’s right, wrong, or indifferent, they always come after the client. This is a hard lesson to learn, but like it or not, that’s the way it is.
If you don’t have complete faith in your payroll service, you need to find one that’s completely trustworthy. There are thousands of cases that have happened in recent history, where this scenario has occurred.
The only potential remedy available to the client, other than paying the outstanding liability in full, is to file an Offer in Compromise. This is not a possibility for the client in question, given the assets they hold.
Sure, the people who ran the payroll service will end up in jail, but how does that help the client. The government still needs it’s money.
Servicing issues, bookkeeping issues, and any other issue you can imagine should be considered in this decision. They’re all signs of an underfunded, badly managed service.
If you have any questions about your current payroll service, please give us a call. We are properly managed, overfunded, and can help.
Accounting Solutions Ltd. stands ready to complete our mission and purpose of protecting you, your family, and your business. Whether you need Employee Retention Credits, PPP Loan Forgiveness, Payroll Services, or Bookkeeping and Tax Work, you can rely on us. I’m here and I remain,
Sincerely yours,
Chris Amundson
President
Accounting Solutions Ltd.
773-267-7500
www.AccountingSolutionsLtd.com
Note that the only professional services provided by Accounting Solutions Ltd. are those specified in a written communication from our office detailing the scope of services to be rendered and the terms and conditions applicable to the engagement.