the income tax basis rules are much more
nuanced and complex, and they will take
longer to reconcile or could be shelved
indefinitely in the interest of time.”
Biden’s Made in America Tax Plan
“is relatively unsurprising and targets
corporate tax, saving the more contro-
versial proposals relating to individuals,
trusts and estates for later this year,”
In her view, the “most interestingand overlooked portion of the Biden taxproposals so far” is the emphasis placedon enforcement.
“We are advising clients to expect anincrease in the corporate tax rate and,more importantly, to prepare for audit,”Hutchinson, whose clients includehigh-net worth individuals and privatebusinesses, relayed.
The IRS’ enforcement budget and,
therefore, the agency’s “ability to effec-
tively audit has fallen over the last decade,”
she said. However, she said that The Made
in America Tax Plan “is part of a broader
overhaul of tax administration that would
give the IRS the resources it needs to col-
lect the taxes that are owed by wealthy
individuals and large corporations.”
Indeed, Greg Valliere, chief U.S. strat-
egist for AGF Investment, said in his
April 8 Capitol Notes email briefing,
that Biden’s tax proposals “are more
than just a debate over how to pay for
$2.25 trillion in infrastructure spending.
It’s an opportunity to impose major new
reforms to corporate tax laws, especially
as they apply to foreign income.”
The Biden tax plan is designed “to
increase corporate tax revenues, which
have fallen to about 1% of GDP, with
many firms not paying any taxes after
enactment of Donald Trump’s 2017 tax
bill,” Valliere said.
It’s possible, Valliere said, that all 50
Senate Republicans vote against Biden’s
tax proposal. “There are simply too
many controversial provisions; ironi-
cally, raising the top rate to 28% from
the present 21% is something many busi-
nesses can live with, but there are other
proposals that are more controversial.”
Biden may have to compromise on
a 15% minimum corporate tax on huge
corporations and a 21% international
corporate tax, Valliere opined.
Further, Biden’s “ability to win pas-
sage of a tax bill through the reconcili-
ation process is in doubt — because he’s
not guaranteed of winning the necessary
votes from all 50 Senate Democrats,”
Washington Bureau Chief Melanie Waddell canbe reached at firstname.lastname@example.org.
Ed Slott’s Last-Minute Tax Tips
As tax time kicks into full gear, tax specialist Ed Slott of Ed Slott & Co. says advisors should heed these last-minute recommendations.
First, the May 17 tax filing deadline does not apply to first quarter 2021 estimated tax payments that are still due by April 15, Slott warns.
“Most times, these payments are based on the income from the prior year andsince 2020 was such a strange and inconsistent year as far as personal earnings,you might need to have that info available by April 15 even you won’t be filingtaxes until May 17,” Slott said in an email.
Also, business corporation tax returns did not get extended due dates, and “arestill due by April 15 (Form 1120),” Slott said. He added that other business returnsfor pass-through entities, like partnerships, LLCs and S Corps were due March 15.
“Although extensions can be filed, any corporations that owe tax for 2020 musthave that paid by April 15, 2021,” Slott said. Also, “make sure your state has alsoextended their due dates.”
For those who received unemployment benefits in 2020, and their income isunder $150,000, the Federal stimulus law exempts the first $10,200 from taxation, but not all states are going along, Slott said.
In early April, New York announced that it “will not go along with the exclusionand will continue to tax unemployment benefits in full,” Slott said. “Make sureyour tax return reflects this adjustment. Remember to claim any stimulus benefitson 2020 returns that were not received last year. This can happen if 2019 incomewas too high or maybe a child was born in 2020.”
As to where Biden’s tax plans are headed, Slott opined that “it’s going to be tight
with a 50-50 Senate, so I don’t see anything extreme passing.”
For instance, nothing will likely happen on “the wealth tax but higher taxes on
corporations and taxing ‘book’ income (profits reported to shareholders, often
substantially less than what is reported on tax returns) seems likely.”
In fact, Slott continued, “when you look at book vs tax return income for some
of these companies, it looks like two totally different companies. One highly prof-
itable and the other on a respirator, showing gigantic losses and qualifying for
enormous tax credits and refunds, yet they are the same company.”
There seems to be support “for taxing corporate income that is shifted to other
countries, but it’s unknown what tax shenanigans companies will come up with to
keep avoiding taxes,” Slott said. “This is not a new challenge and so far, the com-
panies and their tax advisors seem to always be a step ahead of the government
on this, no matter what laws are passed.”
Also likely: increased taxes on high individual earners, both for income and
FICA taxes, and possibly for capital gains as well, Slott said.