Tax Update: A Look Back and a Look Forward
A Happy New Year to all. As we start the new year we thought it was a good time to look back at some of the tax law changes over the past year and to look at some of the tax changes coming this year.
A look back …
A lot happened in 2021. That goes for new taxes as well. There were three major federal tax bills enacted, a wide ranging North Carolina tax bill and several versions of tax proposals to fund the Build Back Better bill. Below is a list of the tax bills along with a major provision or two from each bill.
Consolidated Appropriations Act – Made expenses paid with Paycheck Protection Program (PPP) loans tax deductible retroactive to April 2020. Allowed businesses that obtained PPP loans to file for employee retention tax credits, if eligible, retroactive to April 2020. Many taxpayers have to amend tax returns to get refunds.
American Rescue Plan Act – Expanded child tax credit, expanded dependent care tax credit, and sent eligible taxpayers advance payments of the child tax credit and a third round of the recovery rebate tax credit (i.e. stimulus payments).
Infrastructure Investment and Jobs Act – Repealed the employee retention tax credit retroactive to October 1, 2021 causing some businesses to underpay their payroll taxes for the fourth quarter of 2021.
North Carolina Budget Bill (November 2021) – Made expenses paid with PPP loans tax deductible resulting in many businesses and their owners having to file amended tax returns for refunds. (We have begun preparing the amended returns for our clients. If applicable to you, we will be in touch.)
A look forward …
North Carolina Budget Bill - The bill lowers individual tax rates beginning in 2022 and phases out corporate tax rates beginning in 2025. Perhaps most important, for at least 2022, the legislation permits partnerships and S corporations to pay NC income tax on behalf if it owners and to deduct those taxes on their federal income tax return thus allowing the owners to avoid the $10,000 state and local tax (SALT) cap on itemized deductions.
Build Back Better Bill- In looking forward to more tax changes the first place to look is the Build Back Better bill being debated in Congress. After initially proposing increased individual, corporate and estate taxes to fund the bill, the revenue provisions were changed to target very wealthy individuals, high income trusts, and corporations that pay low income tax rates. As currently written, the tax changes would likely affect only a few of our clients.
Indexed Tax Figures – Of course there are new indexed 2022 tax figures for a myriad of taxes every year. We list a few of the key ones in the chart below.
