In recent months, the United States has come up with a number of solutions to help taxpayers and corporations keep their heads above water. With tens of millions of families losing their stream of income and businesses shut down, the revenue stream is at a critical low ebb.
The loss of income throughout the economy has been immense. In previous blog posts, we discussed various tax filing extensions the IRS has granted individuals, businesses and other entities required to report their incomes and employment taxes. While the IRS may be smelling like a rose now (taking it easy on some), don’t assume they intend to ignore the serious loss of revenue.
The debt of Congress relief funding and bailout money has reached an unprecedented level
The tax filing extension was not the only way that Congress has sought to ease the burden that the current pandemic has caused citizens and businesses in the country. A large stimulus package, small business loans, funding for additional healthcare and additional unemployment funds have left the country in debt to the tune of trillions of dollars.
So, what does that mean in the future for taxpayers? Eventually, the debt will have to be repaid. Two of the main options for recovering tax revenue include either 1) raise new money through increased taxes and tax rates or 2) apply existing tax laws that are both under and on the public radar.
Why taxpayers and businesses should proceed with caution
Once the tax filing extensions have passed and the country’s economy is on the rebound, the IRS will resume collection operations as quickly as possible and in earnest. Already in May, more than 20,000 furloughed agents have been recalled. IRS Commissioner Charles P. Rettig knows his job and understands his responsibility to Congress. Whether or not new laws will be passed to draw down the deficit remains to be seen, but there are enough laws already in place to start recovering what has been lost.
Income and employment taxes are the backbone of revenue in this country. Commissioner Rettig is familiar with many of the illegal schemes businesses use to reduce or hide from taxes. With increased pressure to close the tax gap, many illegal schemes that may have gone undetected in the past are now likely to be detected. If earnings reports and employee tax withholdings are not considered completely on the up-and-up, it could result in an audit, interest, fines and penalties. If you are uncertain whether you are playing by all the rules, it will be important to talk to a knowledgeable tax attorney.
How to protect yourself or your business when the IRS day of reckoning comes
If you are taking the extensions offered by the IRS, expect possible scrutiny when you file, even if you feel you are a lower audit risk or have never experienced an audit in the past. Getting the right answers about before you make decisions regarding taxes is always a good idea. And having an experienced attorney on your side in the event you face questions, is an important first step.