Recently, President Jow Biden announced the American Families Plan set to expand the oversight of the Internal Revenue Service of tax preparers. It will help to expand tax audits and, at the same time, seek more information from the banks. This plan by Joe Biden is very ambitious and is $1.8 trillion in value.
"The $1.8 trillion plan, which Biden announced last week during an address to a joint session of Congress, would also raise the top income tax rate to 39.6 percent and eliminate the lower capital gains rate for households earning over $1 million." [1]
To Help In Lowering The Tax Rates
Last week, the President announced the plan while addressing the joint session of Congress. He informed the House about the expected increase in the income tax rate to 39.6%. It shall also help eliminate rates of lower capital gains for households that earn more than $1 million. This plan is also expected to curb tax breaks which would help in lowering the tax rates for inherited assets for more than $1 million capital gains or $2.5 million for couples. This figure is arrived at after combining real estate exemptions and the carried interest tax break for private equity and hedge fund firm managers.
Multiple Benefits for Families with Low Income
This plan also aims at funding multiple benefits and advantages for families. It would include the Child and Dependent Care Tax Credit, Child Tax Credit, the Earned Income Tax Credit permanent. It would also include funding for college education, child care, paid leave, universal pre-K education, nutrition programs, etc.
"In a $1.8 trillion plan that could bring more audits and more taxes for high-income households, advocates say this is a call for consumer protection that's geared towards low-income families. And in a plan that would direct more money to low-income families through boosted tax credits, it's never been more necessary, they add." [2]
Policy And Long-Term Goal Of Democrats
This IRS provision gives it the necessary authority to ensure the regulation of paid tax preparers. Although this provision has garnered relatively less focus and attention, it perfectly fits with the policy and long-term goal of Democrats in Congress. Certain preparers make a lot of errors when preparing tax returns. It was a finding as per the fact sheet that came from the Joe Biden administration. These tax preparers charge taxpayers heavily while at the same time setting them up for expensive audits. Since tax preparers play a vital role in tax administration, it helps claim the latest credits by the tax preparers. Congress is asked to pass this bipartisan legislation giving that authority to the IRS.
Registered Tax Return Preparer Program was suspended in 2013
The IRS rolled out a program that required testing, registration, and continued tax preparers' education during the Obama administration. This program was known as the Registered Tax Return Preparer program. After a group of independent tax preparers filed a lawsuit, the program was invalidated by a federal judge in 2013. The judge ruled lack of statutory authority with IRS to regulate tax preparers. IRS is focusing on regulating un-enrolled tax preparers since then. The American Families Plan is also going to pave the way for more regulation in the tax niche.
RESOURCES:
[1] https://www.accountingtoday.com/news/biden-plan-would-give-irs-authority-to-regulate-tax-preparers
Published by: Book Club