National Small Business Week, Tax Increases, and IRS Direct File
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Tax Policy/News:
April 29: National Small Business Week: IRS.gov offers one-stop shop for small business tax resources
The Internal Revenue Service (IRS) is encouraging small businesses to utilize the Small Business and Self-Employed Tax Center on IRS.gov, especially during National Small Business Week from April 28 to May 4, which celebrates the contributions of small businesses to the economy.
With the theme "Building on America’s Small Business Boom," the IRS emphasizes that the Tax Center offers comprehensive resources for various business needs, including starting, structuring, operating, and closing a business.
It provides tools, educational materials, and guidance on federal tax obligations, such as obtaining an Employer Identification Number, record-keeping, and tax filing.
Additionally, the IRS offers webinars, workshops, and seminars, along with subscription services for small business news and updates on tax issues. Small businesses are encouraged to visit the IRS.gov Small Business Week page for more information.
The Internal Revenue Service (IRS) has concluded its Direct File pilot program, an initiative aimed at enabling taxpayers to file their federal tax returns directly with the IRS for free. Spanning 12 states, the pilot attracted significant interest, with over 140,000 taxpayers utilizing the new service.
Notably, the IRS incrementally expanded the availability of Direct File during the filing season, observing a surge in interest in the final weeks. Leading states in terms of accepted returns included California, Texas, and Florida.
Overall, taxpayers using Direct File claimed over $90 million in tax refunds and reported $35 million in tax balances due. The pilot also saw strong nationwide interest, with millions visiting the Direct File website.
Despite its success, the IRS has not yet decided on the future of Direct File, planning to evaluate feedback and consult stakeholders before making a determination.
Operational costs for the pilot totaled $2.4 million, with an additional $24.6 million spent by the IRS, including the Report to Congress.
April 25: House, Senate GOP Diverge on Tax Concerns Ahead of 2025 Talks
As House and Senate Republicans gear up for major tax negotiations, there's a noticeable divergence in their approaches to key tax policy issues.
While Senate GOP leaders emphasize the traditional notion that extending current tax policies, especially those fostering economic growth, doesn't require offsetting costs, House Republicans, influenced by fiscal concerns, stress the need for offsets, given the soaring national debt.
The outcome of these negotiations, particularly regarding the extension of expiring provisions from the Tax Cuts and Jobs Act, may hinge on election results, potential pledges from political leaders, or the possibility of a partisan reconciliation package.
Both chambers recognize the complexity of the discussions, given the magnitude of the potential legislation and the competing fiscal priorities.
The differing views between House and Senate Republicans reflect broader debates on deficit spending and fiscal responsibility, with dynamics further complicated by Democrats' diverse policy goals.
Economic News/Policy:
April 29: President Biden Has Proposed Tax Increases. Here Are 6 Of Them
President Joe Biden's FY 2025 budget proposes substantial tax increases, primarily targeting higher-income taxpayers.
For ordinary income, Biden suggests raising the top rate from 37% to 39.6% for those earning $400,000 or more annually, aiming to revert to pre-2018 levels.
Moreover, long-term capital gains taxes for individuals earning over $1 million could nearly double, potentially reaching 44.6%. The proposal also entails hiking the Medicare tax rate from 3.8% to 5% for individuals making more than $400,000 per year.
Additionally, Biden's budget aims to repeal Section 1031, affecting real estate exchanges, and eliminate the carried interest loophole for fund managers, treating such interests as ordinary income.
Furthermore, a proposed billionaire tax would impose a minimum 25% tax rate on households with a net worth exceeding $100 million, constituting a form of wealth tax.
While the viability of these tax changes remains uncertain, they underscore Biden's ambitions for financing his expansive budget plan.
Technology:
April 24: Biden Makes $11 Billion Push to Beat China at Chip Research
The Biden administration's semiconductor industry revitalization efforts extend beyond factory grants to boosting semiconductor research as part of the 2022 Chips and Science Act.
The Commerce Department is investing $11 billion to enhance US leadership in research and development, aiming to pioneer critical electronic components and compete with Beijing in advanced technology.
While nearly 85% of manufacturing incentives have been allocated, R&D funding is just beginning to open applications. This initiative seeks to attract a tech workforce to chip design and foster innovation, though questions linger about funding sufficiency and approach.
The department has funded projects in metrology and plans to establish facilities for new packaging technologies and workforce development, with a forthcoming $200 million manufacturing institute.
However, concerns arise over a march-in framework allowing government patent takeover, potentially undermining program goals and industry interest.
Plans for commercial R&D leveraging manufacturing subsidies are on hold after a Pentagon funding withdrawal, prompting a reshuffling of incentive funds.
Fallout includes Applied Materials reconsidering a $4 billion R&D investment, highlighting the need for robust commercial R&D support to maintain global semiconductor leadership. Governor Newsom and Senator Padilla advocate for additional commercial investments alongside the $11 billion R&D fund.
Energy and Environmental Policy/News:
The Department of Treasury and the IRS have released Notice 2024-36 for owners of clean energy manufacturing, recycling projects, greenhouse gas emission reduction projects, and critical material projects, announcing the second round of credit allocations under the program.
This notice follows the initial allocation round where approximately $4 billion in credits were allocated. The remaining $6 billion credits will now be allocated through this second round.
Appendices A, B, and C of Notice 2023-44 have been modified accordingly.
The Department of Treasury and the IRS are collaborating with the Department of Energy (DOE) to recommend projects, with the DOE section 48C portal opening by May 28, 2024, for taxpayers to submit concept papers for credit allocation.
More guidance on the Inflation Reduction Act of 2022 can be found on the IRS.gov page dedicated to the act.
April 25: IRS releases final guidance on transfers of certain credits under the Inflation Reduction Act
The Department of Treasury and Internal Revenue Service have released final regulations outlining procedures for transferring eligible tax credits, including provisions for partnerships and S corporations, under the Inflation Reduction Act and the Creating Helpful Incentives to Produce Semiconductors act (CHIPs).
Taxpayers can opt to transfer credits to unrelated parties for cash payments, with the unrelated taxpayers able to claim these credits on their returns.
The regulations include guidelines for excessive credit transfers and recapture events, as well as a mandatory IRS pre-filing registration process.
Specific rules for partnerships and S corporations as both eligible and transferee taxpayers are outlined.
These regulations follow previously issued proposed regulations and temporary rules for the IRS pre-filing registration process, with detailed instructions provided in Publication 5884.
The IRS has also updated FAQs based on these final regulations, with further information available on the Inflation Reduction Act of 2022 page on IRS.gov.
The Internal Revenue Service (IRS) is leveraging funds from the Inflation Reduction Act (IRA) to assist taxpayers in accessing clean energy credits through various online tools and services.
These initiatives, facilitated by the IRA funding, aim to enhance taxpayer services by introducing electronic processes, updating systems, and improving compliance and fraud prevention measures.
Notably, the IRS Energy Credits Online tool enables sellers of clean vehicles to register electronically and receive advance payments promptly, while the IRA/CHIPS Pre-filing Registration Tool allows qualifying entities to electively pay or transfer credits related to manufacturing and clean energy investments.
The IRS has conducted educational campaigns and office hour sessions to guide users through these processes, emphasizing personalized assistance and prompt resolution of issues.
Taxpayers are encouraged to utilize IRS.gov for resources on accessing credits and deductions under the Inflation Reduction Act.
For Fun:
April 29: Scientists Have Created a Functional Brain Cell Based on a Mix of Salt And Water
Researchers from Utrecht University in the Netherlands and Sogang University in South Korea have achieved a significant breakthrough by simulating neurological junctions, known as synapses, using water and salt—the same components found in the brain.
This innovation, termed an iontronic memristor, mimics synaptic plasticity, enabling neurons to adjust connection strength in response to input history.
Measuring a mere 150 by 200 micrometers, the device utilizes electrical impulses to move ions through its cone-shaped channel, altering electrical charge and facilitating memory retention akin to the brain.
This advancement marks a crucial step towards developing artificial systems capable of emulating the brain's capabilities.
Despite being in early stages, the device's scalability and cost-effectiveness suggest promising applications in various fields. The researchers envision combining synthetic synapses in diverse configurations, exploiting the brain's medium to enhance computer efficiency.
This interdisciplinary approach, blending theoretical and experimental physics, exemplifies how scientific boundaries can be pushed to achieve groundbreaking results, as evidenced by the team's "wow" moment upon realizing the artificial synapse.
Published in PNAS, this research underscores the potential of iontronics to revolutionize computing by closely following the brain's blueprint.