For those who have been procrastinating in solving their IRS problems, now is the time to act.
With President Trump taking over in January, there will be changes at the IRS. A new Treasury Secretary is likely, along with new policies for tax administration and for non-filers, collections, and audits.
For the past eight years following the financial crises, the IRS has been much more willing to accept Offers in Compromise than it has been in years past. That may change. It’s never wise to put off resolving IRS problems, but a new incoming administration makes it even more necessary to deal with it now. The IRS estimates that 7 million individuals did not file a tax return in 2010. That adds up to an enormous amount of lost tax revenue at a time when tax cuts are likely. The government will need to make up the difference.
Many tax cuts will likely be proposed. Trump has already proposed reducing the amount of individual tax rates to three: 12%, 25%, and 33%. Now there are seven, with the highest at 39.6%. He also has said he will eliminate the alternative minimum tax and the estate tax. What this means is a loss of tax revenue in excess of $6 trillion. Of course, the Congress would have to vote on any changes to the tax code, but with the Republicans controlling both houses, big tax cuts are likely.
If Trump is successful in repealing the Affordable Care Act, millions will lose not only their health insurance but the subsidies that were calculated on their tax returns. The additional Medicare tax on higher income filers that helped to pay for Obamacare would likely be repealed. Penalties (technically not really penalties, known as “shared responsibility payments”) for not having health insurance are set to increase in 2016 to a minimum of $695. If the Act is repealed, would the shared responsibility payments be enforced?
Finally, how will a President who claims to be audited every year handle the IRS? What will happen to his own audit that he said was in process during the campaign? This is all new territory, and it will be interesting to see what happens, to say the least. One thing is for sure; change is on the way.