Corporations have been claiming more “uncertain” tax breaks in recent years. With IRS audits down, corporations are being increasingly aggressive in their tax positions, according to a Washington Post analysis of corporate filings. The IRS used to audit nearly every large corporation tax return, but it now audits only about half. As a result, The Post found the firms increasingly claim deductions that their own tax advisers believe are unlikely to pass muster under audit.
Yeah, we knew that. Senator Rob Portman publicly acknowledged on Sunday what had been widely reported: Republican members of the bipartisan Senate group negotiating a compromise infrastructure bill no longer support boosting IRS funding to pay for new public works. The GOP senators walked away from that part of the agreement in response to pressure from Republican activists who prefer to use IRS funding increases as a political wedge issue in 2022. Senate Majority Leader Chuck Schumer wants the group to wrap up an agreement by mid-week.
Intuit’s TurboTax will no longer participate in IRS Free File program after this tax season. Intuit says that “due to the limitations of the Free File program and conflicting demands from those outside the program” it has decided “to not renew its participation.” After ProPublica reported that Intuit and other tax prep software companies hid free versions of their software from consumers, the IRS changed its agreement with tax prep companies so the agency can create an online filing system of its own. Presumably, the tax prep firms will now build their own versions, without IRS constraints.
Are state tax cuts a sign of the success, or excess, of federal aid? TPC’s Richard Auxier studies the data and finds many states still digging out of the fiscal hole caused by the pandemic. Federal assistance was meant to help close that gap, and, so far, it’s succeeding. Do states still need federal aid, or should the aid be repurposed? Richard concludes that “in part because of successful federal action, some don’t. But some clearly still do.”
The expanded monthly child tax credit is more likely to be spent on children. Why? The New York Times explains the psychology behind the decision to spend. Money that shows up easily, without extra paperwork (direct deposit), labeled for a specific purpose (“child” tax credit), and separate from an annual tax refund may end up in a different “mental account.” Families are more likely to spend monthly child tax credit dollars on routine expenses like food, child care, and rent.
California offers a tax credit to businesses that hire workers experiencing homelessness. The state’s new budget includes an annual credit of $2,500 to $10,000 for each new employee, depending on hours worked, for business that pay at least 120 percent of the California minimum wage. The state will allocate up to $30 million a year for the tax credit program, which expires after 2026.
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