Forward-thinking tax planning, preparation and compliance is the best possible way to limit your present and future tax liabilities and achieve the best outcomes for coming tax years. At Brock CPA, we practice smart tax planning, so that our clients save money and avoid unnecessary losses. It is always a wise decision to rely on legal tax practices that can be accounted for, and increased audits anticipated in the future only reinforce this approach.
Tax Cheating Could be Costing the Government $1 Trillion A Year
Earlier this year, the head of the IRS calculated that the U.S. government is losing roughly $1 trillion in unpaid taxes each year. This tax gap has increased drastically since that last official estimate of $441 billion annual average from 2011-2013. These estimates are taking new factors into consideration such as the use of cryptocurrency and illegally sourced income that goes undetected by the IRS.
Some may ask: who pays the price when wealthy taxpayers evade their obligations? Unfortunately, the answer is these costs are endured by taxpayers who are actually following the law.
The considerable difference between tax dollars owed and what is actually collected by the IRS has given lawmakers the incentive to promote more aggressive tax enforcement to ultimately increase government income.
The majority of individuals earn their income through wages where taxes are automatically deducted from each paycheck. However, pass through entities, such as partnerships and limited liability corporations, are not subject to automatic withholding. This advantage gives owners a better opportunity to bypass certain tax obligations. A recent study has shown that the richest 1 percent of Americans do not report about 20% of their income to the government through this strategy, costing the government around $175 billion a year.
Biden’s New Tax Enforcement Approach
Moving forward, President Joe Biden has proposed his Made in America Tax Plan with the goal to give the IRS an extra $80 billion in order to strengthen tax enforcement on individuals and corporations that evade paying federal taxes. He plans to use the redeemed tax funds for the cost of his American Families Plan. Bidens new plan also comes on top of a $2.3 trillion infrastructure-led spending proposal.
The tax experts at Brock CPA stay up-to-date with the ever-changing tax laws and provide professional guidance to help grow your business and improve your financial situation. We pride ourselves in smart, ethical, accurate, and timely tax planning, preparation and filing.