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Forbes
31-07-2025
- Business
- Forbes
Reflecting On IRS Cuts - Should You Still Be Compliant?
The IRS used to be a lot more formidable. I am certain of this from the experience of my career as an accountant which, is going on 50 years. depending on what parts you want to count. But you might say that the memories of old people are notoriously unreliable. That when they talk about either how great or how difficult it was in the past they tend to exaggerate. Not for nothing was I a history major. I understand that problem, so I will back up my claim with some history. The Olden Days I have a hard time accepting that 1985 is 40 years ago, but when you do the math, that is how it comes out. In 1985, I was approaching an inflection point in my career. I was promoted to manager some time around then, which really was not that big a deal at Joseph B. Cohan and Associates (JBC). I spent a good amount of time studying "Tax Reform For Fairness, Simplicity, And Economic Growth - The Treasury Department Report to the President" that was issued in 1984 and formed the basis for the Tax Reform Act of 1986, which is what made my career. During that period there were always a few audits of our clients going on. And it was not because they were picking on us. Here are some numbers from "Highlights of 1985 - Commissioner and Chief Counsel Internal Revenue Service". At the end of 1985, the IRS had 96,705 employees. Of them, 24,433 were involved in "Examination" and 15,119 in "Collection". They collected $743 billion from a population of 239 million at a cost of $0.48 per $100 collected. Of 96,496,900 1984 individual returns, 1,265,592 were examined. That's 1.31%. The rate for individual returns with total positive income over $50,000 was 3.53%. At the end of 2022, there were 84,553 IRS employees who collected $4.901 trillion at a cost of $0.29 per $100 collected from a population of 334 million. There were 161,666,477 individual returns of which 326,611 were examined. That is 0.2%. Returns from $500,000 to $1,000.000 were audited at a rate of 0.6%. Only for returns over $10,000.000 is the rate higher than the 1984 big dollar ($50,000) rate of 3.53%. This information is drawn from IRS Data Books. For some today's dollars perspective the $50,000 big bucks in 1984 would be $158,723 now. Interestingly President Trump has proposed no income tax for people making less than $150,000. At any rate the thresholds don't line up that well, but I want to keep going. So let's compare the 0.2%/0.6% 2022 rates to the 1.31%/3.53 1984 rates. The latter would be somewhat reflective of my experience in 1985. Using some elementary probability computations, we can determine that if the audit rate is at 0.6% (2022 big bucks, but not megabucks) in a forty-year career the chance that you will never face an audit is 79%. If you sign 100 tax returns as a preparer the chance that none of them will be audited is 54%. At the 0.2% rate your chance of no audits on 100 returns is 82% and the chance that you will never face an audit in a 40-year career is 92%. The 1984 audit rates are a different story. At the big bucks rate of 3.53% your chance of never being audited in the course of a 40 year career would be 24%. The chance that none of a pile of 100 returns that you signed as prepare would be audited would be 3%. I believe that created a much stronger sense that audits were a real thing that might happen to you. Certainly that was the sense at JBC. Current Events Recent history is that there was a ramp up in IRS personnel. The IRS closed fiscal 2024 with 99,628 employees. Then there are the current events. The reductions in IRS numbers are an ongoing story, but in May they were down to 77,000 and expected to continue going down. Numbers had been going down and got to 74,000 in 2018 and 2019 before starting back up. It looks like they may be heading lower. Not material in numbers, but somewhat symbolic, 250 IRS agents have been detailed to immigration enforcement. This is reminiscent of Ted Cruz's idea of abolishing the IRS and sending them all to the border. Regardless, it seems quite likely that audit coverage will not be going higher for 2025 and 2026 returns. What Should You Do? Treasury Circular 230 regulates people who practice before the IRS prohibiting written advice considering that a tax return might not be audited or that the particular matter would not be caught on an audit. American Institute of Certified Public Accounting (AICPA) standards of tax practice forbid practitioners from making recommendations that exploit the audit selection process of a taxing authority. The National Association of Enrolled Agents incorporates Circular 230 into its ethical guide. So a lot of the people who are competent in advising you on the tax law are supposed to ignore the high improbability of audit in giving you advice. I tried interviewing a couple to see if I could shake them loose. That will be the subject of my next post, but since I don't practice anymore and quit the AICPA because I thought the dues were not a good value, I can give you some advice if you want to exploit the low audit probability in the coming years, besides the advice to not do it because it is wrong. The first piece of advice is to remember that most likely this too shall pass. So avoid doing anything that will either extend or never start the statute of limitations. That would include not filing at all or large omissions of gross income and outright fraud. Whatever scheme you come up with and you really should come up with your own, don't tell anybody about it. Don't pay somebody a lot of money for tax schemes that the boring stick in the mud professionals tell you don't work. When the IRS comes up for air those may be the first things that they go after. You will be on a list that the promoter kept and the money you paid the promoter will be gone along with all the interest and penalties. If you owe the IRS a lot of money for past taxes, more than you can realistically pay, there is probably no point in being proactive in reaching out to them. When you do get notices pay close attention and when told that you have a right to a collection due process hearing send in the appropriate form. Provide the request information within the deadline. When they don't get back to you for long periods that is a good thing. There is a ten year statute of limitations on collections that runs against the IRS. The people who regularly call you about special programs to work out your IRS debt are almost certainly running scams. If you can't handle whatever monthly payment the CDP hearing results in, appeal. Conclusion I recommend that you stay compliant because it is the right thing to do, but there are some practical considerations. The chance of criminal prosecution for willful violation of the tax laws still exists, even if it is vanishingly rare for people who are not breaking other laws, and not bragging about it, or telling other people to do it. It does seem that in the current environment we may have administrations where enthusiasm for enforcing immigration laws alternates with enthusiasm for enforcing the tax laws. If I were engaging in tax shenanigan's my nightmare would be thousands of masked ICE agents being transferred to the IRS Criminal Investigation Division.
CBS News
07-07-2025
- Health
- CBS News
Trump's "big, beautiful bill" means massive cuts to Medicaid — here's how Minnesotans could be affected
President Trump's "big, beautiful bill" is now law, and Minnesota, like other states, is confronting the reality of sharp cuts to Medicaid, which in Minnesota is called Medical Assistance. The bill means tax breaks as well as cuts to the nation's safety net programs. It will extend the 2017 Trump tax cuts for most Americans and create new temporary tax cuts on tips and overtime, as well as taxes on social security for many Americans. But the cuts in Medicaid, over $1 trillion over the next 10 years, are expected to reshape not just the federal budget but state and local budgets too. Minnesota state officials warned the bill would cut $500 million a year in reimbursements for hospital and nursing home coverage. The Kaiser Family Foundation estimates 152,000 to 253,000 Minnesotans could lose their health insurance coverage. The cuts would shift costs to state and county governments, a move that could lead to higher local taxes. "I think it's a tremendous increase in the cost to both state and county governments, but also to providers in terms of uncompensated care," John Connolly, the state director of Medicaid, said. The president's bill also creates new work requirements for able-bodied Medicaid recipients. It requires monthly and quarterly proof that work requirements are being met. The provision, while hailed by many, is expected to create more paperwork and require an increase in the need for more government workers to manage it. "We are scouring the bill to understand everything that is in it and how it interacts with our state policies and programs," Connolly said. The bill is expected to have a major impact on hospitals and nursing homes, which rely on Medicaid reimbursements. Hennepin Healthcare in downtown Minneapolis is the area's largest safety net hospital. The hospital estimates it will lose $145 million in funding a year. About 95,000, or half of all its patients a year, depend on Medicaid. Eighty-seven percent of all births at Hennepin Healthcare are paid for by Medicaid. However, the hospital will still be required to treat all patients regardless of their ability to pay. The predicted result: long lines in the ER and cuts to major specialty programs. "If my patients can't come in to see me, they are going to wait until things get really bad," said Dr. Tyler Winkelman, who works at Hennepin Healthcare. "And that means once things have hit that point, they will need to see my colleagues in the emergency department, and we really worry about the emergency department filling up." The bill is structured so that most Americans will feel the impact of the tax cuts in the spring of 2026, but some of the provisions, like work requirements for Medicaid, do not take place until 2027, after next year's midterm Congressional elections. You can watch WCCO Sunday Morning with Esme Murphy and Adam Del Rosso every Sunday at 6 a.m. and 10:30 a.m.
Yahoo
06-07-2025
- Politics
- Yahoo
James Carville Makes Ambitious Midterm Prediction After Trump's ‘Big, Beautiful Bill' Passes
Longtime Democratic strategist James Carville predicted that President Donald Trump's so-called 'big, beautiful bill,' signed into law Friday, would create a 'mass extinction event' for Republicans in Congress and create future opportunities to elect more Democrats. 'Political anthropologists are going to look back at this, and it's going to be called a mass extinction event because there are a lot of them going to be extinct when people go to the polls voting for this,' Carville told CNN's Anderson Cooper on Thursday. Carville's comments came during a panel interview with fellow Democratic strategist Paul Begala, who claimed Republicans in Congress will hurt from Trump's bill, which guts Medicaid to help fund tax cuts for the rich. 'Medicaid is beloved, by the way, Trump won people on Medicaid. He won their votes and you know, a good politician rewards his voters, a great politician reaches out beyond to new voters, but a stupid politician punishes his voters,' Begala said. Begala cited polling from Kaiser Family Foundation that found a large majority of Democrats, independent voters and Republicans view Medicaid favorably. The nonprofit health policy organization also found that most Americans have some connection to Medicaid. Trump's 900-page bill extends tax cuts for wealthier households, makes more than $1 trillion in cuts to Medicaid, slashes food assistance for low-income households and puts rural hospitals at serious risk of shutting down. The Congressional Budget Office estimated Trump's bill could add $3.3 trillion to the national debt. Carville agreed with Begala, calling Trump's mega bill 'the most unpopular piece of legislation in history.' He suggested Democrats can use this bill's passing to lift themselves up. 'Every Democrat voted against this. Every Democrat, regardless of the ideology, their ethnicity, or their regional token, we can all rally around this, and we can run on this single issue all the way to 2026,' Carville said. 'And Paul is right, we're going to pick up more than 40 House seats, I can tell you.' James Carville Fears Election Tampering From Trump: 'I Don't Put Anything Past Him' James Carville Calls Out Fox News On Live TV For Playing Into This 'Giant Lie' James Carville Says There's 1 'Brilliant Thing About MAGA,' And Dems Should Learn From It
Fox News
03-07-2025
- Politics
- Fox News
Fox News Politics Newsletter: 'Big, Beautiful Bill' passed by Congress
Welcome to the Fox News Politics newsletter, with the latest updates on the Trump administration, Capitol Hill and more Fox News politics content. Here's what's happening… - Pentagon says Iran strikes set back nuclear program by 2 years - Noncitizens get 'only limited' due process rights: Conservative legal expert - Resurfaced video shows NYC mayoral hopeful saying he wants to replace private homes with communal living Congress officially passed President Donald Trump's "one big, beautiful bill" on Thursday afternoon after back-to-back sleepless sessions for both the House and Senate. The massive agenda bill now goes to Trump's desk to be signed into law just in time for Republicans' self-imposed Fourth of July deadline. The bill – which advances Trump's policies on tax, the border, defense, energy and the national debt – narrowly passed the House of Representatives in a mostly party-line vote. All but two Republicans, Reps. Thomas Massie, R-Ky., and Brian Fitzpatrick, R-Pa., voted for the bill, which passed 218 – 214… READ MORE. STOCKPILE STRATEGY: Colby's China-focused Pentagon playbook sparks Ukraine arms freeze RUSSIAN DEFIANCE: Putin rebuffs Trump in call, vows to press on with Ukraine war ATOMIC KNOCKOUT: Pentagon says Iran strikes set back nuclear program by 2 years BROUGHT TO JUSTICE: How the DOJ carried out a $14.6 billion healthcare fraud takedown JUDICIAL OVERREACH: Noncitizens get 'only limited' due process rights: Conservative legal expert 'NEEDED CHANGE': Rubio-run State Department dumps Biden-era DEI hiring criteria, replaces with 'fidelity' ROGUE RULING?: Legal expert reveals how Trump admin can deport major anti-Israel activist CALLED SHOT: Justice Alito's warning about nationwide injunction 'loophole' looms over Trump cases BORDER BATTLEGROUND: Troops at the border: How the military's role in immigration enforcement has exploded under Trump SOCIALISM VISION: Resurfaced video shows NYC mayoral hopeful saying he wants to replace private homes with communal living CLOSING UP SHOP: From New York to Arizona, migrant facilities shuttering in wake of Trump's border crackdown Get the latest updates on the Trump administration and Congress, exclusive interviews and more on
Bloomberg
01-07-2025
- Business
- Bloomberg
Senate Tax Bill Targeting Medicaid Heads to House
Donald Trump's $3.3 trillion bill passed the Senate Tuesday thanks to a tie-breaking vote from his vice president and following a furious push by Republican leaders to mollify holdouts like Alaska Senator Lisa Murkowski. In doing so, the GOP handed the president a victory while avoiding his social media ire or that of his followers. But Democrats warned that Republicans have set themselves up for a gruesome midterm election as millions of Americans—in red and blue states alike—lose access to health care or food aid. The unprecedented slashing of Medicaid will help fund more than $3 trillion in new tax cuts, meant to replace expiring cuts passed by Republicans in 2017. The majority of those renewed cuts will go to America's richest. Passage of the full Republican package, which now goes back to the House, also likely means that over the next decade the US will surpass $40 trillion in national debt.
