Effects Felt From US Tax Cuts And Jobs Act
It seems the good times are about to roll for taxpayers after the enactment of the Tax Cuts and Jobs Act. And not only has the tax reform feel-good factor driven US stocks to their highest values, companies have announced pay rises and other tax perks for employees as a result, such as with the recent announcement from Walmart.
But even here, some companies are seeing short-term fallout. As a result of the cut to the corporate income tax rate to 21 percent, many large multinationals have adjusted the value of their deferred tax assets, resulting in a write down in their profits, typically by billions of dollars. And elements of the TCJA could also prove particularly problematic for banks, many of which have expressed concern about the “BEAT” interest deduction limitation provisions.
What’s more, while taxes might be getting lower for many individuals and businesses, they don’t seem to be getting much easier, despite earlier promises that taxpayers will be able to file on a postcard. Indeed, as the National Taxpayer Advocate, Nina E Olson, pointed out last week in presenting her latest annual report to Congress, taxpayers are going to need all the help they can get in the coming weeks and months as they adjust to these major changes.
Even the 2008 Economic Stimulus Payment – a relatively minor undertaking compared with changes being brought about by the TCJA – resulted in a 125 percent increase in calls to the Internal Revenue Service’s jammed phones lines between 2007 and 2008, according to Olsen. So heaven help you if you expect to seek advice from an IRS agent any time in the next year or two.
Tax reform was supposed to reduce the need for taxpayers to hire help from tax professionals to get their tax returns right. But judging by Olsen’s findings, and given that US taxpayers already spend about 8 billion hours a year complying with their taxes, that need has probably never been greater!
For more information on this, and other topical international tax matters, please visit: https://www.cchgroup.com/roles/corporations/international-solutions/research/global-tax-weekly-a-closer-look