Inflation Reduction Act
  • November 18, 2022
  • admin
  • 0

This year, the IRA (Inflation Reduction Act) replaced the House-passed “Build Back Better Act” of late 2021, with the aim to, among other things, lower the nation’s debilitating inflation. As the act becomes mainstream, average taxpayers may get confused regarding what they owe to the Internal Revenue Service (IRS). That is why consultation with an experienced IRS tax attorney is important. If you are a resident of Dallas – Fort Worth, you have easy access to the best IRS attorneys in Dallas – Fort Worth, TX. In this blog, we take a closer look at the Inflation Reduction Act tax provisions. So, let’s get started!

Major tax provisions you should know

The updated draft legislation of the Inflation Reduction Act will include the following major changes, effective after December 31, 2022, unless otherwise noted.

Blog Related Post: Is Your Financial Hardship Preventing You from Paying Off Your Tax Dues? Read This!

Individual Income Taxes

Here are the major highlights:

  • The IRA extends the limitation on pass-through business losses enacted in the 2017 TCJA (Tax Cuts and Jobs Act) for two years through 2028.
  • It also extends the expanded health insurance Premium Tax Credits provided in the ARPA (American Rescue Plan Act), including allowing higher-income households to qualify for the credits and boosting the subsidy for lower-income households, through the end of 2025.

Mistakes to avoid if you owe back taxes

When it comes to back taxes, even a slight mistake (intentional or unintentional) can trigger serious tax collection procedures. Common mistakes to avoid include:

  • Not paying taxes: As a taxpayer, it goes without saying that not paying taxes will only land you in serious trouble. This includes ‘failure to file’ & ‘failure to pay’.
  • Not knowing your options: The IRS provides several tax help options such as the IRS offer in compromise, penalty abatement, and payment agreement to help taxpayers conveniently. The only way you can find a resolution to your IRS problem is first knowing your options.

Corporate and International Taxes

Here are the corporate and international taxes in a nutshell:

  • The IRA imposes a 15 percent minimum tax on corporate book income for corporations with profits over $1 billion, effective for tax years beginning after December 31, 2022.
  • It creates a 1 percent excise tax on the value of stock repurchases during the taxable year, net of new issuances of stock, effective for repurchases after December 31, 2022. Excluded from the tax are stock contributed to retirement accounts, pensions, and ESOPs (employee stock ownership plans).

Other Modeled Tax Proposals

Other modeled tax proposals are as follows:

  • The IRA modifies, extends, and creates a variety of tax credits for green energy and other efforts primarily through 2031 or 2033.
  • The provision raises the Superfund tax on crude oil and imported petroleum to 16.4 cents per barrel (indexed to inflation) and increases other taxes and fees on the fossil fuel sector.

Significant Proposals Not Modeled

Here are the significant proposals not modeled:

  • It expands IRS enforcement funding by about $80 billion over 10 years.
  • The IRA also imposes a 95 percent excise tax penalty on drug manufacturers to lower drug prices.
  • It increases the research & development tax credit amount that can be claimed against payroll taxes for small businesses by $250,000.

Blog Related Post: A Look at Tax Inflation Adjustments for the 2022 Tax Year

Economic effects of the Inflation Reduction Act Tax Provisions

As per estimates, the IRA could potentially diminish long-term economic production by around 0.2 percent and result in the loss of about 29,000 full-time equivalent jobs in the United States. Such an estimation was calculated using the General Equilibrium Model of the Tax Foundation. Over time, it will also lower the typical after-tax income for taxpayers in every income quintile. That being said, there’s a silver lining to this dark cloud. According to the White House, no family with an annual income under $400,000 will have their taxes increased by even a small amount. Interestingly, the Inflation Reduction Act will eventually increase the marginal income tax rates that apply to higher earners and corporations. The distributional outcomes that follow do not take into account how IRS enforcement or drug pricing regulations affect after-tax revenues. On a traditional basis, the plans will result in an increase in the bottom quintile’s after-tax income of around 2.1 percent in 2023, mostly as a result of increased healthcare subsidies. The expansion of energy tax credits will enhance the after-tax income of the top 1% earners by 0.1 percent in 2023, offsetting income losses from the corporate book minimum tax and the tax on share repurchases.

Final word

Numerous changes are introduced to the country’s tax structure, a trend that has seen increased frequency ever since the covid pandemic first hit. The best way to keep track of the many changes and avoid incorrectly filed, unfiled, or unpaid IRS taxes is to get help from a seasoned IRS tax attorney. If you are a resident of Dallas looking for tax attorney help, The Law Offices of Nick Nemeth has the best tax attorneys in Dallas – Fort Worth, TX. We offer tax help in Dallas – Fort Worth to taxpayers on all issues related to their state and federal taxes. We have a team of highly experienced attorneys that are always ready to discuss your case and render the necessary assistance. To get a FREE no-obligation consultation, call (972) 426-2553 or fill out our contact form.

Please follow and like us:

What Our Clients Have to Say

Susan WilsonSusan Wilson
03:27 25 Jan 23
I have been very pleased with the solid counsel and guidance that Nick Nemeth has provided me regarding my tax issue. I found him to be honest and straightforward which I appreciated. I was impressed with his relevant experience and knowledge . He has definitely brought me peace of mind during a difficult and stressful time.
Sarah HowardSarah Howard
03:44 14 Nov 22
I would like to thank Mr. Nick and his staff for the superb help that I received from them. My IRS problem was resolved quickly and efficiently. It took 2 visits to convince me that I was over my head. I thought that I could call the IRS, appeal my tax notices and settle on a payment plan on my own. After many phone calls to the IRS, waiting sometimes more than 4 hours with no resolution to speak of, it proved to be extremely difficult and stressful. Revisiting Mr. Nick was a huge wake up call. My account was reviewed, and a payment plan was established with the IRS within a week. I will be forever grateful to the staff who worked on my case and especially to Lorna who listened to me vent while going through this painful process.
00:33 07 Aug 22
I cannot say enough good things about Nick and his team. When I first met with Nick he was up front, honest, friendly and efficient. When I worked with one of his attorneys, Eric B, I was just as pleased. All of the staff there are nice and very helpful. I wish I hadn't waited so long to get help with my issue. Over 6yrs I tried getting through and getting anywhere with the IRS and hardly made any progress. I know this may not be the case for all, and even I thought it would take longer than it did, but 3mos and they had my situation straightened out. I still can't believe it. Thank you thank you THANK YOU for all that you did for me. This is a huge burden gone out of my life now thanks to you. If anyone needs help out there, I know you may not want to shell out more money to get their help but it may just save you in the long run.
Spoilly GirlSpoilly Girl
23:49 03 Aug 22
The Nemeth Law team is exceptional. They treat their clients like a family member who is in crisis. They want you to get the best possible outcome. I really appreciate everything that they did for me. Jake and Ashley had the greatest role in my case and it all turned out for the best for me. Thank you Nick and team for easing my fears and getting me through the long process. I'm truly grateful.
Eddie WaltEddie Walt
19:44 12 Jul 22
During a time in which competent, professional service at a fair price seems to have disappeared, Mr. Nemeth and his team are a refreshing breath of fresh air.From my first phone call to the final settlement of our case with a non-responsive IRS, they under-promised, over-delivered and were in constant courteous contact to make sure we knew exactly what was happening and where we stood.I hope to never need their services again, but, should I receive another friendly letter from the IRS...I know who to call!
Quick Inquiry


    Enter the text you see above