Page 13 - Investment Advisor May 2021

the income tax basis rules are much more proposals that are more controversial.” ation process is in doubt — because he’s
nuanced and complex, and they will take Biden may have to compromise on not guaranteed of winning the necessary
longer to reconcile or could be shelved a 15% minimum corporate tax on huge votes from all 50 Senate Democrats,”
indefinitely in the interest of time.” corporations and a 21% international Valliere said.
Biden’s Made in America Tax Plan corporate tax, Valliere opined.
“is relatively unsurprising and targets Further, Biden’s “ability to win pas- Washington Bureau Chief Melanie Waddell can
corporate tax, saving the more contro- sage of a tax bill through the reconcili- be reached at [email protected].
versial proposals relating to individuals,
trusts and estates for later this year,”
Hutchinson opined. Ed Slott’s Last-Minute Tax Tips
In her view, the “most interesting As tax time kicks into full gear, tax specialist Ed Slott of Ed Slott & Co. says advi-
and overlooked portion of the Biden tax sors should heed these last-minute recommendations.
proposals so far” is the emphasis placed First, the May 17 tax filing deadline does not apply to first quarter 2021 esti-
on enforcement. mated tax payments that are still due by April 15, Slott warns.
“We are advising clients to expect an “Most times, these payments are based on the income from the prior year and
increase in the corporate tax rate and, since 2020 was such a strange and inconsistent year as far as personal earnings,
more importantly, to prepare for audit,” you might need to have that info available by April 15 even you won’t be filing
Hutchinson, whose clients include taxes until May 17,” Slott said in an email.
high-net worth individuals and private Also, business corporation tax returns did not get extended due dates, and “are
businesses, relayed. still due by April 15 (Form 1120),” Slott said. He added that other business returns
The IRS’ enforcement budget and, for pass-through entities, like partnerships, LLCs and S Corps were due March 15.
therefore, the agency’s “ability to effec- “Although extensions can be filed, any corporations that owe tax for 2020 must
tively audit has fallen over the last decade,” have that paid by April 15, 2021,” Slott said. Also, “make sure your state has also
she said. However, she said that The Made extended their due dates.”
in America Tax Plan “is part of a broader For those who received unemployment benefits in 2020, and their income is
overhaul of tax administration that would under $150,000, the Federal stimulus law exempts the first $10,200 from taxa-
give the IRS the resources it needs to col- tion, but not all states are going along, Slott said.
lect the taxes that are owed by wealthy In early April, New York announced that it “will not go along with the exclusion
individuals and large corporations.” and will continue to tax unemployment benefits in full,” Slott said. “Make sure
Indeed, Greg Valliere, chief U.S. strat- your tax return reflects this adjustment. Remember to claim any stimulus benefits
egist for AGF Investment, said in his on 2020 returns that were not received last year. This can happen if 2019 income
April 8 Capitol Notes email briefing, was too high or maybe a child was born in 2020.”
that Biden’s tax proposals “are more
than just a debate over how to pay for Tax Bill
$2.25 trillion in infrastructure spending. As to where Biden’s tax plans are headed, Slott opined that “it’s going to be tight
It’s an opportunity to impose major new with a 50-50 Senate, so I don’t see anything extreme passing.”
reforms to corporate tax laws, especially For instance, nothing will likely happen on “the wealth tax but higher taxes on
as they apply to foreign income.” corporations and taxing ‘book’ income (profits reported to shareholders, often
The Biden tax plan is designed “to substantially less than what is reported on tax returns) seems likely.”
increase corporate tax revenues, which In fact, Slott continued, “when you look at book vs tax return income for some
have fallen to about 1% of GDP, with of these companies, it looks like two totally different companies. One highly prof-
many firms not paying any taxes after itable and the other on a respirator, showing gigantic losses and qualifying for
enactment of Donald Trump’s 2017 tax enormous tax credits and refunds, yet they are the same company.”
Yuri Gripas/Abaca/Bloomberg Senate Republicans vote against Biden’s countries, but it’s unknown what tax shenanigans companies will come up with to
bill,” Valliere said.
There seems to be support “for taxing corporate income that is shifted to other
It’s possible, Valliere said, that all 50
keep avoiding taxes,” Slott said. “This is not a new challenge and so far, the com-
tax proposal. “There are simply too
panies and their tax advisors seem to always be a step ahead of the government
many controversial provisions; ironi-
on this, no matter what laws are passed.”
cally, raising the top rate to 28% from
Also likely: increased taxes on high individual earners, both for income and
the present 21% is something many busi-
FICA taxes, and possibly for capital gains as well, Slott said.
nesses can live with, but there are other
MAY 2021 INVESTMENT ADVISOR 11