A Brief Summary of the Inflation Reduction Act

New tax legislation was signed into law by President Biden this month. The new law is designed to reduce health costs, reduce greenhouse gas emissions and raise taxes on corporations and wealthy investors.

Will this law change your 2022 taxes?

Large corporations will see the biggest hit and most taxpayers will see very little impact to their tax bill. However, households earning less than $100,000 will benefit from extended subsidies for the Affordable Care Act premiums. The new law also prevents the subsidy cliff which happens when income goes over the limit and the subsidy eligibility is lost altogether. The law is designed to protect middle income families and small business owners making $400,000 per year or less. Families can take advantage of new and extended energy credits and electric vehicle credits. This law provides electric vehicle credits of up to $7,500 for new electric vehicles and $4,000 for used electric vehicles.

Funding the IRS - 80,000 new agents?

The IRS is a necessary evil in helping the US run the tax collection process. Provisions were added to the law to increase funding to the IRS. Dealing with the IRS has been increasingly frustrating over the past several years. They work with an antiquated system that still uses paper and snail mail versus the current technology available in our modern world.

Congress has cut the IRS’s budget 20 percent since 2010. That makes it hard for the agency to help Americans file their taxes; it answered fewer than one in 10 calls for help during the 2021 filing season.

The new law provides funding to help the agency update its systems and hire more people. The IRS plans to recruit 87,000 employees to help fill jobs left behind by retirees and expand overall to help improve the broken system.

Will this new IRS funding increase your chance of being audited?

The IRS does plan to crack down on people and business owners who don’t pay taxes. The Biden administration has said it will target “rich” tax cheats and not increase audits on people making less than $400,000 a year. Let’s hope that is actually the case! We can expect that this new IRS funding will help you and I communicate and work with the IRS using modern technology that the rest of the world is using. But we know that government progress is slow.

Changes in tax law are constant and we work to keep you updated on how these changes affect you. If you have any specific questions about the Inflation Reduction Act, p

lease reach out to us.