Tax

Like Georgia, more states are cutting income taxes in what is mostly a bipartisan effort nationwide. In 2021 alone, 14 states took steps to cut income taxes. So far in 2022, dozens of states are following suit to either lower or flatten their income taxes, and several others have been looking at proposals to lower or temporarily suspend certain excise taxes. Still others have been considering temporary tax measures. By comparison, only two states have proposed raising taxes in 2022: Hawaii and Massachusetts. What’s driving the nationwide race to cut taxes?

When an issue arises with a tax return filing, processing, or other concern, many will turn to the IRS to help with questions, address issues, and resolve outstanding situations. This has been a realistic expectation of the agency, but since the pandemic, it has all changed. The combination of staffing shortages, lack of modern technology, and previously existing backlogs, means it will be some time before the agency is operating normally. However, recent reports suggest the IRS has made notable progress in certain areas.

Almost 30 percent of global carbon dioxide emissions can be traced back to building operations. This is a surprising number that reflects the impact certain building systems can have on the environment. Beyond this, older systems are likely to be consuming more resources, and therefore cost more, to operate. That is why so many have decided to leverage renewable energy systems to address the problem.

Supply chain disruptions are nothing new to auto dealerships at this point. Chip shortages and the difficulty obtaining new semiconductors are just two factors that have strained the automotive industry. More than two years after COVID-19 was declared a global pandemic, dealerships using the last-in-first-out (LIFO) inventory method are still hurting, but for a less obvious reason.

Many Atlanta families and high net worth individuals invest significant time uncovering strategies designed to limit federal and state income taxes due. Tax planning focuses on reviewing tax law changes, updates to incentives and deductions, and other changes in areas where savings may be present. Although these activities are most common at year-end, many will make it a regular focus throughout the year.

During the height of the COVID-19 pandemic, many Atlanta businesses were struggling to maintain operations while navigating uncertainty, new safety regulations, and an assortment of government-issued restrictions. One of the federal relief programs offered to help offset the hardships, the Employee Retention Tax Credit (ERC), provided a much-needed cash boost to business owners. However, when the program unexpectedly came to an end 3 months early (end of 3rd quarter of 2021) it created an issue for those who were not expecting to pay employment taxes. Unfortunately, the withheld amount became due, and many employers were simply unable to repay it. Since December 2021, the IRS has been providing relief to these taxpayers and those who filed an amended return but has yet to receive a refund.

"At any time during 2021, did you receive, sell, exchange, or otherwise dispose of any financial interest in any virtual currency?" This new question appears on IRS Form 1040, and taxpayers are required to answer. More than half of new Bitcoin investors joined the platform within the last 12 months, so there are taxpayers who are completely new to the market, and its potential tax implications. Given the new disclosure requirement, it is essential for Atlanta investors to understand the federal tax treatment of cryptocurrency investments.

Georgia taxpayers may be getting an extra refund soon if the state legislature’s latest proposal passes muster. Under H.B. 1302, taxpayers who filed returns in 2020 and 2021 would receive a one-time refund between $250 and $500.

Many Atlanta S-corporation and partnerships have been confused about the new Schedule K-2 and K-3 filings required as part of the 2021 tax return. Not only does the requirement mean the business and partners/shareholders must report international tax-related information on an updated form, but even the type of information required has changed. Despite the fact the updated forms were issued last September, many are unfamiliar with the new filing and concerned about the short adoption timeline. The IRS was aware of the potential for problems and issued IRS Notice 2021-39 which amongst other things offers transitional penalty relief for certain filers. Although helpful, many needed additional time to become familiar and comply with the new requirements. To assuage concern, the IRS announced new exemptions for certain domestic partnerships and S corporations.

Atlanta home builders and contractors had a bumpy ride last two years. Rising material costs, supply chain disruptions, labor shortages, and lower sales combined for a perfect storm of challenging business conditions. Many contractors and developers relied on tax benefits to get by. Some were temporary, like COVID-related tax credits, and others, like energy-efficient tax credits, were industry-specific. In any case, tax incentives helped provide cash flow in an uncertain environment.