After becoming the 46th President of the USA, Joe Biden has taken firm steps in redirecting the falling path of the American economy. The much-awaited tax policies of the new government have re-installed the faith of business in the country & accounting firms will be able to make the best use of the policies to assist small businesses. Covid-19 pandemic has thrown several challenges before the stumbling economy & firm steps are expected from the government to save the economy. The tax session will be a smoother one with the implementation of the right tax policy.
The pandemic has forced the government to invest on multiple fronts & support the businesses to keep the economy going. There is uncertainty in Congress with a lot of things on the plate to discuss as the focus shifts to an updated tax plan. The pandemic demanded a stricter tax policy and Biden is expected to boost the economy through swifter tax regimes. This blog will highlight the possible aspects of Biden’s tax plan & benefits for the accounting firms.
Table of Contents
- Taxes Levied on Corporate Taxes
- Ensuring the Big Firms to Pay at least 15 Percent in Taxes
- Strengthening of Global Minimum Tax
- Replacement of Fossil Fuel Tax Subsidies with Clean-Energy Initiatives
- Enhance the Speed of Internal Revenue Service
What’s in Biden’s Tax Plan?
President Biden’s tax proposal includes a provision to raise the corporate tax rate to 28 percent and makes things harder for companies to move their assets overseas and enhance the Internal Revenue Service. These are desperate times that require extraordinary steps & the Biden administration has come up with policies to support the local business & individuals.
The administration aimed to reverse the reduction of corporate taxes under President Donald J. Trump. Earlier, in the President Trump administration, the corporate rates were cut to 21 percent for 35 in 2017. It enacted a series of provisions that the Biden administration says have encouraged the big firms to move lower-tax jurisdictions, like Ireland.
The proposed plan is expected to raise a total of $2.5 trillion in new tax revenues over 15 years. Also according to the analysts at the University of Pennsylvania’s Penn Wharton model, ‘It put the estimate even higher, estimating a 10-year increase of $2.1 trillion, with about half the money coming from the plan’s various changes to the taxation of multinational corporations.’
There is now increased potential to pass more of the legislative agenda of the administration. Senate rules require 60 votes to pass legislation – including the budget reconciliation. The administration will be able to now focus on the initiative of bipartisan support, like tax incentives for domestic manufacturing & infra investment.
Expiring Provisions of the Tax Cuts & Jobs Act & Proposed Improvements
Qualified Business Income Deduction
For pass-through entities, the 20% qualified business income deduction is mandatory and it could be a sunset sooner for people with income of $400,000 or more. The Biden administration has proposed changes to increase the top tax rates by 10% on pass-through income.
By the end of 2025, the SALT (State And Local Tax) deduction of $10,000 per home is set to expire. It has been a point of debate for Congress since the inception of the law in 2017. The SALT limitation is resulting in higher taxes and the Biden administration had suggested changes or expiry of the policy.
Research and Development Expenses
The businesses will need to capitalize on the research & development costs & monetize the cost over 5 years. Earlier businesses were able to filly expedite the research & development cost in the way their liked or administered.
Highlights of the Biden’s Tax Policy
Taxes Levied on Corporate Taxes
The aim of the administration to raise taxes during the Covid-19 period will be to raise the corporate tax rate. Biden administration is viewing the raise of the rate as the way to enhance the corporate tax receipts that have plunged to their lowest levels as the share of the economy.
Ensuring the Big Firms to Pay at least 15 Percent in Taxes
Large-sized companies pay less than the current tax rate & at times nothing. The tax code provision is allowing firms to reduce liabilities through offshoring, exemptions, & deductions.
Strengthening of Global Minimum Tax
As part of the Trump administration’s 2017 tax package, the U.S. companies have strengthened the global minimum tax regime by raising the tax rate & eliminating some of the exemptions that weakened the impact.
Replacement of Fossil Fuel Tax Subsidies with Clean-Energy Initiatives
The Biden administration plans to strip away from the longstanding subsidies for Oil & other fossil fuels and replace them with greater incentives for clean energy.
Enhance the Speed of Internal Revenue Service
There has been a struggle within the Internal Revenue Service with budget cuts & slim resources over the years. The administration is trying for better funding of tax collection agencies.
Benefits of Biden’s Tax Proposal for Accounting Firms
Let us look at some of the top benefits for accounting firms with the new tax policy –
- The accounting firms will be able to uplift the businesses with the use of a new set of support from the Biden administration.
- The firms will be able to guide the big firms & enterprises with the obligations & make necessary changes in the tax calculations.
- The firms will assist the companies to grasp the changing tax structure. All the hassle of remembering the new tax regulations will be eliminated with the automation of tax rules & tools.
- Filing the taxes and necessary norms becomes easier with the introduction of new tax policies within the stipulated time.
- The tax firms don’t waste any time guiding the business with the necessary adjustments required in filing taxes.
The Biden administration is promising the people a well-planned recovery from the Covid-19 pandemic. The tax policies are aimed at helping small & large businesses comply with the new tax rules at the right point in time. Contact the right kind of accounting firm to be upbeat with Biden’s tax policies & tax norms. The accounting firms are always on their toes and will guide the businesses to oblige to the tax regulations promptly.