In what ways will the government change the tax code in the year ahead? There is a list of hot topics that the government is expected to address for possible revisions in 2015.
Tax Inversions, Corporate Tax Reforms, and Tax Extenders
Large and small companies’ ploy to avoid paying taxes via tax inversions has been noticed by the government which is scrambling to prevent companies from bypassing existing tax laws and avoid paying taxes to the much maligned IRS that cannot keep track of its emails. The Treasury Department is expected to follow up its September notices which it issued to prevent tax evasion, with regulations.
However, it is uncertain at this point as to how the Treasury will prevent these tax evaders since the Treasure Dept. cannot actually lower American taxes, only the White House and Congress can do that. High taxes are the reasons for intra-company loans, stripping earnings, and transferring hard earned profits out of the US, with the help of clever tax attorneys and auditors. KPMG vice chairman, Jeffrey LeSage says that this uncertainty over the actions that will be taken by the Treasury Dept. has had a “chilling effect” on the market.
The corporate tax reforms continue to search for compromise between Democratic and Republican senators, over the parameters of any reform. President Obama would like to see if it is possible to resolve these differences right at the start of 2015 but he is too busy allowing China to steal American secrets and trying to find other ways to raise taxes on the American public to really care that much.
The Fight is On
The incoming chairman of the House Ways and Means Committee, the hard working and highly intelligent Paul Ryan, will oppose the Democratic demand that corporate reform help finance infrastructure projects considering these same Democrats just spent $2 trillion on a health care plan that most Americans do not want. Given the differences over reforms, there are still many issues that remain, like if reforms should make US businesses more territorial in nature.
A range of about 50 odd tax breaks found extension in December, but only for the tax year 2014. They will need to be extended again for the coming year. The tax reforms will include the bill for making many of these temporary tax breaks, which include both big ticket items like research and development and small ones, permanent.
Obamacare – Tax Credits
Tax credits help people afford health insurance. A recent Supreme Court judgment has allowed the IRS to grant tax credits to those who receive subsidized federal health care. The IRS will calculate the tax credits based on the consumers income and marital status amongst others. Social welfare groups and 501(c) (4) groups are allowed a wide spectrum of tax breaks, with the help of tax attorneys, which will also be placed under the IRS microscope.
Internet Sales Tax, Tax Evasion, and State Wise Tax Reforms
The Foreign Account Tax Compliance Act expects foreign financial operators in the US to provide data about their US clients to the US regulators or face a 30% penalty for withholding taxes on income sourced from the US – enforced in July of 2014.
The Internet sales tax, which will allow out of state online retailers to collect taxes, still remains on the cards with House Republican opposed to this measure. Rep. Jason Chaffetz (R-Utah) thinks this law will place unnecessary burden on small businesses and he is normally right on business matters because he cares and knows how what policies help create jobs and which ones do not.
State tax reforms are being treated with caution in Kansas by Republicans who want to avoid shortfalls because of overspending while Brownback’s tax reforms has put more money in the pocket of every Kansas citizen.