Tax Update Blog

Tax News & Views Tax Hikes Loom Roundup

May 15, 2020 | Blog

By Daniel McNeil

Tax Hikes Loom on the Horizon Once Pandemic Settles DownJonathan Curry, Tax Notes ($). “Two major problems before the pandemic — growing inequality and unsustainable debt — have only been exacerbated during recent months”

“We all know what the options are in this situation,” Gravelle said. Policymakers can choose to either raise taxes or cut spending, and cutting spending equates to cutting Social Security and Medicare, which seems unlikely, she said. “I think at some point there will be a need to bite the bullet and raise taxes,” she said. 

Exactly what those tax increases should look like, however, is less clear, Gravelle said. Policymakers may want to consider a new broad-based source of revenue, such as a VAT or a carbon tax. Or they could raise revenue from wealthy individuals’ unrealized capital gains that escape taxation either directly — for example, through an accrual tax on capital gains — or indirectly by raising corporate tax rates, she said.

Trump Talks New Taxes for Companies With Overseas Production – Alexis Gravely, Tax Notes ($). “Trump said the taxes would act as an incentive to sway domestic companies from making products outside the United States. “We should make everything in the United States,” Trump said. “Years ago, we made our own product. We didn’t rely on everybody in the world. They have their own problems.””

HEROES Act First Bid to Provide Phase 4 Relief for Businesses and Individuals – Garrett Watson, Tax Policy Blog. “The Health and Economic Recovery Omnibus Emergency Solutions (HEROES) Act, a draft released Tuesday by Democrats in the U.S. House of Representatives, is the first bid to provide additional economic relief to individuals and businesses affected by the coronavirus pandemic and economic downturn. The bill is projected to cost about $3 trillion—a third greater than the nearly $2 trillion spent in the Coronavirus Aid, Relief, and Economic Security (CARES) Act passed by Congress in March.”

 

TPC Analyzes Five Ways To Replace The SALT Deduction Cap – Frank Sammartino, Tax Vox.

In a new report, the Tax Policy Center analyzes the revenue, distributional, and incentive effects of five ways to replace the SALT deduction cap. Four of the options would impose broad limits on itemized deductions. The fifth would raise individual income tax rates in the four highest tax brackets. The options analyzed are:

  • Reduce all itemized deductions by 35 percent (haircut)
  • Limit total itemized deductions to $84,000 for married taxpayers filing a joint return and $42,000 for other taxpayers (dollar cap)
  • Limit the tax benefit from all itemized deductions to 2 percent of Adjusted Gross Income (AGI limit)
  • Limit the tax rate that applies to all itemized deductions to 14 percent (tax rate limit)
  • Increase each of the top four income tax rates by four percentage points (raise top rates)

New IRS Guidance Allows Employers More Flexibility For Benefits Plans During COVID-19 Crisis – Kelly Phillips Erb, Forbes.

IRS Notice 2020-29 is providing temporary changes to allow employees in section 125 cafeteria plans to make changes to their health care coverage, health FSA, and dependent care programs.

 

Accounting for Deficits: When Should They Matter and How Should We Solve It?Taylor LaJoie, Tax Policy Center. “Reporting suggests that Congress will continue to consider a variety of legislative solutions to support Americans enduring the ongoing public health crisis, provide short-term financing and tax relief for businesses and individuals, and eventually, revive economic growth after the crisis passes.”

Homeowner's insurance is sort of tax deductible in some home office instances – Kay Bell, Don’t Mess with Taxes.

You can write off a portion of your home insurance premium when use part of your home for business. In this situation, the Internal Revenue Service will allow you to claim a portion of your overall residential policy premium as it relates to your work space.

The amount of the policy's cost that can be claimed is the percentage of your home used as your home office. For example, if 10 percent of your home is your office, then 10 percent of your home insurance premiums can be deducted. 

Kay goes on to further explain the requirements for home office deduction:

"If you are the business owner, your home office must meet two requirements.

  1. Used regularly and exclusively for business. It doesn't have to be a separate room; a portion of room designated for work use only counts. But regardless of how large or small, the room or area cannot be used for personal tasks, too.
  2. Used as your principal place of your business. This is possible even if you conduct business outside your home, for example, to meet with clients, as long as you use your home substantially and regularly to conduct business."

Deducting home office expenses – Dayna Roane, Journal of Accountancy

IRS Publication 587 list additional home office deductions.

 

IRS grants relief for COVID-19 disruptions on tax residency – Dave Strausfeld, J.D., Journal of Accountancy. “The relief eases some potential consequences that a prolonged stay in a country may have on the determination of where an individual or business is subject to taxation. The relief will benefit certain foreign citizens living in the United States, U.S. nationals living abroad, and foreign businesses with activities in the United States.”


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This is a roundup of tax news and opinion. Any opinions expressed or implied are those of the author and not necessarily those of Eide Bailly. Opinions found in linked items are those of the authors of the linked item, not of your bloggers or of Eide Bailly. “$” means link may be behind a paywall. Items here do not constitute tax advice.