Tax Relief For American Families and Workers Act Passes Out of House Ways & Means Committee
The Tax Relief for American Families and Workers Act was passed by the House Ways and Means Committee on a 40-3 vote. Only three Democrats voted against it since, in their opinion, it did not increase the child tax credit enough.
Democrats continue to harp on the Republicans for not increasing the child tax credit even though it is the Republicans who originally increased it from $1,000 to $2,000 back in 2017 (effective 2018) and allowed up to $1,400 of it to be refundable.
If the act passes, the major item that applies to farmers is that 100% bonus depreciation is allowed on 2023 returns. Therefore, farmers might not want to file their return until they see if this act is passed sometime in February. This is another key reason to make a Jan. 15 farmer’s tax estimate and not try to file by March 1. These late tax acts seem to happen more and more often.
Otherwise, the act is essentially the same as we reported last week, but we wanted to highlight a few changes or address items brought up by readers:
• The increase in the 1099-MISC and 1099-NEC from $600 to $1,000 only applies to payments made after Dec. 31, 2023. Therefore, it will not affect any current 1099 filing requirements. There is no retroactive provision.
• There were some tweaks on the ERC promoter penalties. First, if a farmer received an ERC credit that was prepared by a firm deemed to be a “material adviser,” then this will be treated as a listed transaction, which leads to additional reporting and, in our opinion, an automatic audit. To be considered a material adviser, the promoter simply charged a fee based on the amount of refund or credit. This means a small CPA firm that charges a fee for ERC services based on a percentage of the credit will be considered a material adviser and thus subject the farmer to possible disclosure to the IRS. Also, any firm that simply charges an amount based on so much per employee might fall under the same definition since that dollar amount will be a percent of the credit. If this act passes, the IRS will issue regulations, but they might be very broad in their interpretation.
• If a CPA firm is determined to not meet the due diligence requirements, then a $1,000 penalty per failure can be assessed.
Do we think this will pass? We believe there is a good chance this will pass and it might happen in the first couple weeks of February. We would hesitate to file any income tax returns with items that might be affected by this act (which primarily 100% bonus depreciation for most farmers).
