Current US Government News on Business Taxes: Optimize Your Financial Strategy

The landscape of business taxes in the United States is constantly evolving, with updates from the Internal Revenue Service (IRS), changes to tax laws, and legislative action that affect payroll taxes, corporate tax rates, and other vital issues.

Staying informed about these changes is crucial for businesses seeking to optimize their finances, avoid penalties, and capitalize on potential tax savings.  

Here is a detailed look at recent US business tax policy developments and how businesses can adapt to them. 

1. IRS Updates on Payroll Taxes 
One of the most significant updates from the IRS involves payroll tax deferral, which was introduced as part of COVID-19 relief measures. While businesses were initially allowed to defer the employer portion of Social Security taxes, the IRS has set specific repayment deadlines.

Businesses that take advantage of the deferral must ensure that the deferred amounts are repaid by the deadline or face penalties and interest. This rule is crucial for companies that deferred taxes in 2020 and 2021 to improve cash flow during the pandemic. 

Additionally, the IRS has issued new guidance on payroll tax credits, such as the Employee Retention Credit (ERC). Although the ERC expired in 2021, businesses can still claim the credit retroactively under certain conditions, especially those that struggled financially during the pandemic. Employers who meet eligibility criteria could claim credits to reduce their payroll tax liabilities, providing much-needed financial relief. 

Takeaway: Businesses must adhere to payroll tax deferral repayment deadlines and explore retroactive credits to reduce their tax liabilities. 

2. Corporate Tax Rate Proposals 
There has been much discussion around corporate tax rates in 2023 and 2024. Currently, the federal corporate tax rate is 21%, but proposals from various lawmakers, particularly from the Biden administration, aim to raise it to 28% for larger corporations.

The administration argues that this increase would help fund public infrastructure projects and social programs while keeping the global US corporate tax rate competitive. 

Businesses should monitor these developments closely. A higher corporate tax rate could significantly impact profitability and the cost of expansion for larger corporations. Conversely, smaller businesses may benefit from certain tax incentives and deductions that continue to be promoted in federal tax policies. 

Takeaway: Large businesses need to prepare for potential increases in corporate tax rates, while smaller companies should explore potential tax incentives. 

3. Changes to Pass-Through Entity Taxes 
Pass-through entities (such as S-corporations, LLCs, and partnerships) have also seen significant tax policy updates. The Tax Cuts and Jobs Act (TCJA) created a 20% deduction for qualified business income (QBI) from pass-through entities, benefiting many small and medium-sized businesses. This provision is set to expire after 2025, and there has been political debate over whether to extend or make it permanent. 

In the meantime, states like California and New York have introduced pass-through entity tax options that allow businesses to bypass the federal $10,000 state and local tax (SALT) deduction cap. Businesses in these states can effectively reduce their federal taxable income by electing to pay taxes at the entity level. 

Takeaway: Pass-through entities should capitalize on the available QBI deduction and explore state-specific tax strategies that reduce overall tax burdens.

4. IRS Scrutiny on Cryptocurrency and Digital Assets 
Another major area of focus for the IRS involves cryptocurrency and digital assets. With the rapid rise of digital currencies in business, the IRS has tightened regulations and reporting requirements.

The Infrastructure Investment and Jobs Act passed in 2021 introduced new reporting rules for digital assets, requiring firms to report transactions involving currencies worth over $10,000. 

Additionally, the IRS has increased enforcement efforts, with plans to use data analytics to identify businesses and individuals that underreport income from digital assets. Failure to report these transactions accurately can lead to significant penalties. 

Takeaway: Businesses involved in cryptocurrency must stay informed about reporting requirements and ensure compliance to avoid fines and audits. 

5. Tax Credits for Green Investments 
The US government continues pushing for environmentally friendly business practices through various tax credits. The Inflation Reduction Act 2022 introduced or expanded several credits for businesses investing in renewable energy, electric vehicles, and energy-efficient building improvements. For instance, the Investment Tax Credit (ITC) and the Production Tax Credit (PTC) offer businesses significant tax savings for solar and wind energy investments. 

Companies seeking to lower their tax liabilities while making eco-friendly investments should explore these credits. Moreover, the federal government offers accelerated depreciation for qualifying renewable energy equipment, allowing businesses to deduct a large portion of these investments in the year they are placed in service. 

Takeaway: Businesses investing in sustainability can take advantage of various federal tax credits and deductions that significantly reduce their overall tax burden. 

6. IRS Enforcement and Funding Increases 
One of the most impactful changes in the business tax environment is the increase in IRS enforcement. The Inflation Reduction Act allocated $80 billion to the IRS over the next decade, with a significant portion of that funding dedicated to tax enforcement. This means more audits, targeting more giant corporations and high-income individuals.

While the IRS has stated that small businesses and middle-class taxpayers will not see an increase in audit rates, companies of all sizes should ensure their tax practices fully comply with federal laws. 

Takeaway: Businesses should prioritize accurate tax reporting and consult with tax professionals to mitigate the risk of audits and penalties. 

Conclusion 
In today’s dynamic tax environment, businesses must stay informed about the latest US tax laws and IRS regulations changes. From potential increases in corporate tax rates to the increased scrutiny of cryptocurrency transactions, it is essential to keep up with these developments to optimize your financial strategies.

Working with a professional tax advisor or financial services firm can help ensure your business takes full advantage of available credits, deductions, and tax-saving strategies while avoiding costly penalties. 

For personalized assistance with tax planning, accounting, and financial management, consider partnering with Vantage-CFO Financial Services. Our team of experts is dedicated to helping businesses navigate complex tax regulations and optimize their financial outcomes. 
 
Reference/s: https://www.irs.gov/newsroom/tax-updates-and-news-from-the-irs