Tax & Accounting News
TaxBuzz Top 5 - IRS Expects to Collect Hundreds of Billions In Back Taxes, Shakira Avoids Jail Time, & More
Each Friday, TaxBuzz brings you the top five tax and accounting headlines you need to know from the workweek. We know life can get busy and you don't always have time to scroll through your news feed to stay informed.
We weed through all of the week's stories to showcase the most important updates in the tax and accounting world.
1. IRS Expects to Collect Hundreds of Billions More In Overdue Taxes
The IRS is expected to collect hundreds of billions more in overdue taxes, according to a recent analysis from the Treasury Department and the IRS. AP News offered details about the IRS report, noting that that increased emphasis on collections is the result of increased enforcement facilitated by the Inflation Reduction Act. Tax revenues could surge by up to $561 billion from 2024 to 2034.
The IRA, signed into law in August 2022, aimed to bolster IRS funding, with estimates suggesting a potential revenue increase of $851 billion over the same period if funding is restored and diversified. The Biden administration views this as a boon for the economy and a key part of its agenda. However, House Republicans have slashed IRS funding, complicating enforcement efforts.
The AP shared a statement issued by National Economic Adviser Lael Brainard, “This analysis demonstrates that President Biden’s investment in rebuilding the IRS will reduce the deficit by hundreds of billions of dollars by making the wealthy and big corporations pay the taxes they owe.
“Congressional Republicans’ efforts to cut IRS funding show that they prioritize letting the wealthiest Americans and big corporations evade their taxes over cutting the deficit,” Brainard continued.
Despite challenges, recent initiatives, including a direct file pilot program for the 2024 tax season, aim to streamline tax processes. Treasury Secretary Janet Yellen has directed IRS leadership to focus audits on higher-income individuals and corporations to close the tax gap, which exceeds $600 billion annually.
2. Federal Appeals Court Rules That Trump Does Not Have Immunity
A federal appeals court ruled on Tuesday that Donald Trump is not immune from charges related to overturning his 2020 election defeat, moving him closer to a potential criminal trial. The U.S. Court of Appeals for the District of Columbia Circuit rejected Trump's claim of immunity, stating, "We cannot accept that the office of the Presidency places its former occupants above the law."
Per a Reuters report, Trump vowed to appeal the ruling, which challenges his efforts to avoid trial. His lawyers argued for broad legal protections for former presidents, but the court found no justification for full immunity. Trump faces accusations of undermining democracy and transfer of power, with the indictment alleging he used false voter fraud claims to pressure officials. Despite delays caused by appeals, the trial's start date remains uncertain. If convicted, Trump could face serious legal consequences, although his future political aspirations may influence the case's outcome.
In addition to these legal woes, Trump has faced other allegations in recent years, including 37 indictments as a result of the now-infamous Mar-a-Lago FBI raid.
3. Shakira Avoids Jail Time With Plea Bargain In Tax Case
Reuters has confirmed Colombian pop icon Shakira has reached a settlement to avoid trial in Barcelona over tax evasion charges totaling 14.5 million Euros. Accepting the charges, she agreed to pay half the owed amount, over 7.3 million euros, and an additional fine of 438,000 euros to evade a potential prison sentence. Prosecutors had previously vowed to seek nearly a decade in jail time.
Shakira cited personal reasons for the settlement, emphasizing a desire to prioritize her career and family. Despite maintaining innocence previously, she acknowledged the charges at the trial's onset. The singer's legal team, while confident in her innocence, opted for settlement due to changed circumstances.
Shakira, who resided in Spain with ex-partner, footballer Gerard Pique, now lives in Miami with their two children. Her case adds to a list of high-profile tax evasion allegations in Spain, including those against soccer stars like Cristiano Ronaldo and Lionel Messi, many of whom settled with substantial fines.
4. New Mexico Tax Restructuring Bill Advances
The New Mexico House of Representatives has passed a bill aimed at restructuring the state's tax system, reducing personal income taxes while increasing taxes on investment income. Endorsed on a 48-21 vote, the bill now advances to the Senate. If enacted, it would result in an estimated annual decrease of $105 million in state revenue through adjustments to personal income tax rates and brackets.
Under the proposed changes, all income taxpayers would see a decrease, with middle-income earners benefiting the most. For example, a couple with a taxable income of $8,000 could see a $16 decrease in annual income tax, representing a 12% reduction. Wealthier couples with an annual taxable income of $400,000 might save around $553 annually, a 2.8% reduction on taxes of $20,042, according to Fox News.
Led by Democratic state Rep. Derrick Lente, the bill includes provisions to support the medical workforce in rural areas, alleviate the financial burden on childcare and preschool providers, and promote clean energy initiatives. It also proposes incentives for large-scale energy storage projects and offers tax credits for New Mexico residents affected by recent wildfires. Despite opposition from House Republicans, the bill aims to rebalance the tax burden and create a more equitable tax system for all New Mexicans.
5. Washington State Bill Would Increase Property Taxes Without Voter Approval
Washington State Senate Bill 5770 proposes granting jurisdictions the authority to annually increase property taxes by up to 3% without requiring voter approval. Proponents argue that the existing 1% cap on property tax growth is insufficient to fund critical services adequately, citing the need to support law enforcement, fire departments, and other essential functions.
However, critics, including the Senate Republican Caucus, contend that the proposed increase could impose significant financial burdens, particularly amidst a housing crisis and inflation. Concerns persist over the lack of direct public input on substantial property tax hikes and the potential long-term costs to taxpayers. The bill highlights The Evergreen State's ongoing debate between addressing fiscal needs and mitigating the impact on residents' financial well-being.
Meanwhile, KOMO News points out that questions have arisen about why the bill does not include provisions for public voting on such significant tax increases. As discussions continue, stakeholders grapple with finding a balance between fiscal responsibility and taxpayer concerns.
Which headline this week most interests you?
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