Tax

On September 8, 2023, the IRS issued  a news release (IR-2023-166) detailing enforcement priorities over the coming year. Regulators will be shifting attention to high-income earners, partnerships, large corporations, and promoters taking advantage of tax laws. Specifically, the agency will target those groups that have experienced a sharp reduction in audit rates over the past decade. In addition, the IRS will also be relying on Artificial Intelligence (AI) to help detect tax cheating, compliance issues, and to improve case selection.

The Inflation Reduction Act, passed in August 2022, made significant changes designed to help counteract the effects of growing inflation. The legislation not only worked to reduce healthcare costs, but also focused on climate change, in part, by incentivizing the addition of energy efficient updates to homes and other dwelling units. The Energy Efficient Home Improvement Credit offers up to $2,000 for the installation of certain efficient appliances and systems. There is also a $150 credit for taxpayers that undergo a home energy audit. Unfortunately, there has been little guidance on what needs to be included in the audit.

Over the last few months, the IRS has issued several warnings about companies using misleading or deceptive practices to encourage businesses to apply. While past activities were focused on simply issuing warnings, the IRS recently announced a change in strategy. On July 26th, it was announced the agency will now increase scrutiny on dubious submissions while providing additional warnings and tips about aggressive marketing.

Fraud in any form is certainly unwelcome. Over the past few years there has been a significant increase in the amount of cyber attacks being perpetrated. In fact, there were over 232,972 individuals that fell victim to phishing attacks of various types in 2021. More specific to tax fraud, there has been a concurrent increase resulting in an average median loss was $278, 325. Given these numbers, the IRS has been working closely with state tax authorities, software companies, tax preparation firms, and payroll processors to defend against identity theft and fraud. A key purpose of the group, known as the Security Summit, is to reduce the amount of fraud through ongoing reporting and education.

For many Atlanta companies little time and attention is spent on tax planning unless the subject arises during year end planning discussions. Most business owners and managers focus on managing operations, sales, production, and human resource issues. Naturally this leaves little time to focus on tax planning, especially when it is an area where most have little practical experience. However, the reality is there are many tax incentives available to eligible businesses that can lead to significant savings. While many of these are taken at the federal level, the state of Georgia also offers several lucrative incentives for eligible companies.

In the past, the IRS has issued warnings about these schemes and the potential consequences to businesses if the claims are denied. Since these companies continue the aggressive marketing tactics, the IRS recently issued another warning which provides additional information. Included are details on signs of aggressive marketing, details on how promoters lure victims, and steps on how taxpayers can protect themselves.

Accounting standards may be changing for crypto assets as early as later this year. The Financial Accounting Standards Board (FASB) issued a proposed accounting standards update (ASU) on March 23, 2023 after receiving feedback calling for crypto asset accounting to be prioritized. The goal of the proposed changes is to improve accounting and disclosure for certain crypto assets. The change will provide financial statement users with improved transparency about crypto asset holdings and more information on the potential risks.

One of the largest tax cuts in state’s history has just been approved by the Tennessee General Assembly. The Tennessee Works Tax Act (Senate Bill 275/House Bill 323) includes more than $400 million in tax cuts for Tennessee businesses and families. There were several updates and changes including a three-month grocery tax holiday, new paid family leave tax credit, and several business tax changes including the introduction of bonus depreciation. The changes were largely viewed as necessary to make the state a more attractive location to companies and a growing mobile workforce.

Typically, the end of a state legislative session rarely captures the attention of Atlanta individuals, families, and businesses. However, the most recent session included several important changes and updates, including another personal income tax rebate. Other changes include the introduction of a new sales tax on digital goods, personal income tax updates, modified elections for pass through entities, and changes to the R&D tax credit. Since the updates were sent to the Governor on March 29, 2023, he has up to 40 days to sign or veto the legislation, otherwise it will become law on May 8th. Several parcels of legislation have already been signed into law including  House Bill 162 and Senate Bill 56. It is expected the remaining provisions will automatically become law early next week.

Over the past few months, there have been several bank failures which underscore the challenging economic conditions currently faced. While the collapse of Silvergate Capital, Silicon Valley Bank, and Signature Bank were triggered by different conditions, the result was the same for each. The federal government was forced to step in, manage the sale of remaining assets, and provide assurance to accountholders no money would be lost as a result of the failure.  Unfortunately, the scenario repeated itself again on May 1st, when First Republic Bank was seized and sold to JP Morgan Chase. A recurring theme in these failures was the large number of uninsured deposits and short-term demandable liabilities held by each institution. In the end, it was an uninsured depositor run that caused two of these failures.