Skip to main content

Potential Tax Law Changes Under New Biden Administration

By

With the change of Administration in Washington, it is likely significant tax law changes will be made in the coming year. The following highlights some of the potential changes in tax law we believe may be made to increase federal tax revenues as well as some potential actions that can be made in anticipation. 

Potential targets for tax increases as we see them

  • Increase in tax rates
  • Reduction or elimination of favorable capital gains and qualified dividend tax rates
  • Reduction or elimination of the qualified business income deduction
  • Reduction or elimination of immediate expensing of capital purchases
  • Reduction or elimination of business tax credits
  • Reduction or elimination of retirement savings incentives
  • Caps on deductible compensation of highly compensated employees

Strategies in anticipation of these concerns (actions to consider now, while benefits from the current tax law are still in place)

  • Sell assets eligible for favorable capital gains tax rates
  • Acquire investment and business property that is subject to favorable depreciation rules before potential law changes
  • In contradiction to the point above, delay acquiring investment and business property to save their write-offs for offsetting against higher tax rates
  • Delay selling business property that would generate a loss
  • While Congress would not want this to be the result of its actions, raise prices on products and services in anticipation of future higher tax rates

While these strategies may help to mitigate the negative consequences of future changes to tax law, there is a potential caveat. Typically in the past, mid-year law changes have been made effective on the date Congress first contemplates a change or at some future effective date. However Congress does have the ability to make retroactive law changes, for example back to January 1, 2021. 

Please contact us or your personal tax professional for more details or advice on specific responses that you might consider for your family or business.



Comments

Post a Comment

Popular posts from this blog

Church Car Purchase for Pastor

By
Question: A church would like to purchase a car for the pastor's use. What is the best method to accomplish this goal? Should the car be titled in the pastor's name? What will be the tax consequences of this arrangement? Answer: The church has two main alternatives for this purchase:  Title the car in the pastor's name and reimburse him for business expenses Title it in the church's name and treat personal use as taxable compensation There are fewer immediate tax consequences for the latter. Since both are viable options, we will discuss both situations in this post. If the church chooses to give the car to the pastor and register it in his name, he is free to use it for whatever personal use he desires with no tax consequences. However, the fair value of the car is taxable as compensation at the time it is given to the pastor. Internal Revenue Code section 102(c) clearly states that gifts given to employees by their employers are taxable compensation. The...
2 comments
Read more

Can Form 4361 be filed after the deadline?

By
Question:   Is it possible to opt out of Social Security after the 2-year deadline? Answer:  Unlike other employees, a licensed or ordained minister has the option to opt out of Social Security and Medicare (FICA). If a minister wants to opt out they must file Form 4361 by the tax deadline including extension, in the second year in which they have received ministerial income of $400 or more. This election is final, and the minister cannot opt back into FICA taxes.  At MinistryCPA, we have received questions from ministers who have exceeded the two year deadline and desire to opt-out. There have been several court cases which provide guidance in answering this question. Some have argued that the minister was unaware of the deadline, had mistakenly believed they had filed a timely election, were given incorrect advice by an IRS employee, or their opposition to participate in Social Security and Medicare did not arise until after the 2-year deadline had passed. In each of th...
Post a Comment
Read more

Form 941 or 944 - Which Should a Church Use for Payroll Reporting?

By Anonymous
Question:   Are churches required to file a Form 944 annually to report their employees' earnings and tax-withholdings? A quarterly Form 941 (rather than an annual Form 944) is required of some employers. Which IRS form, if any, should be filed? Answer: According to IRS Section 1402(c) and 3121(c), ministers are not subject to mandatory income tax withholding. Unless one or more ministerial employees request non-mandatory withholding, church employers with only ministerial employees do not need to file Form 941 or Form 944.  The IRS  Ministers Audit Techniques Guide  explains in further detail a minister's treatments for Social Security, Medicare tax, and income tax withholding.   Form 941 or 944 must be filed when non-ministerial employees are compensated or when ministers request withholding. When can a church file the annual Form 944 rather than filing Form 941 each quarter? The IRS may permit the annual filing of Form 944 for employers wh...
Post a Comment
Read more