As work continues to focus more attention onto high-income compliance issues, the Internal Revenue Service announced plans today to establish a special area to focus on large or complex pass-through entities.
The new work unit will be housed in the IRS Large Business and International (LB&I) division. In addition, the new pass-through area will include the people joining the IRS under the new IRS hiring initiative announced. As part of larger transformation work underway at the IRS, the Internal Revenue Service announced the opening of more than 3,700 positions nationwide to help with expanded enforcement work focusing on complex partnerships, large corporations, and high?income and high-wealth individuals.
“This is another part of our effort to ensure the IRS holds the nation’s wealthiest filers accountable to pay the full amount of what they owe," said IRS Commissioner Danny Werfel. "We are honing-in on areas where we believe non-compliance among our wealthiest filers has proliferated over the last decade of IRS budget cuts, and pass-throughs are high on our list of concerns.
This new unit will leverage Inflation Reduction Act funding to disrupt efforts by certain large partnerships to use pass-throughs to intentionally shield income to avoid paying the taxes they owe.
These efforts are consistent with our broader commitment to use Inflation Reduction Act dollars to end the era of historically low error rates for wealthy and large entities, while making sure middle- and low-income filers continue to see no change in audit rates for years to come."
Following a top-to-bottom review of enforcement efforts, the IRS announced on Sept. 8 the start of a sweeping, historic effort to restore fairness in tax compliance by shifting more attention onto high-income earners, partnerships, large corporations and promoters abusing the nation's tax laws.
Pass-through organizations, which will be the focus of the new group, includes entities such as partnerships and S-corporations. These groups are not subject to the corporate income tax; instead, income is “passed through” onto the income tax returns of the individual or corporate owners and taxed at their income tax rates.
Pass throughs are frequently used by higher-income groups and can be complex tax arrangements.
The creation of a new pass-through work group in LB&I is part of the new compliance effort. LB&I Commissioner Holly Paz announced the start of work on the new area today at a speech before a Tax Executives Institute meeting in New York.
“This is an important change we will be making, and we will be working in the months ahead to efficiently and effectively transition to this new group,” Paz said. “This effort will include working inside the IRS as well as working with external partners to ensure this is a smooth transition period for everyone involved.”
IRS will also be coordinating with the National Treasury Employees Union (NTEU) on the effort. Paz said the work group is expected to formally “stand up” sometime late next year, although work involving pass-through areas will continue to intensify in the meantime.
The group will eventually include employees currently in LB&I as well as the Small Business/Self Employed division. IRS employees, no matter if they are just joining the IRS or have years of IRS experience, can expect expanded opportunities for development wherever they are in the agency.
The larger compliance effort, building off work following last August's Inflation Reduction Act funding, will center on adding more attention on high-income and high-wealth individuals, partnerships and large corporations that have seen sharp drops in audit rates during the past decade.
The changes will be driven with the help of improved technology as well as Artificial Intelligence that will help IRS compliance teams better detect tax cheating, identify emerging compliance threats and improve case selection tools to avoid burdening taxpayers with needless "no-change" audits.
DOL has denied numerous requests to extend the comment period for the proposed changes to the overtime pay rule.
As a result, comments must be submitted by November 7.
Background:
The US Department of Labor (DOL) has proposed changes to the white?collar exemptions to federal overtime pay requirements that could severely and negatively impact our industry and the economy generally.
Currently, an employee must meet three criteria to qualify as “exempt” from overtime pay: first, they must be paid a salary; second, that salary must be more than $684/week ($35,568 annually); and third, their “primary duties” must be consistent with executive, administrative, or professional positions as defined by DOL.
DOL has proposed raise the minimum salary threshold to $1,158 per week ($60,209 annually) – an increase of nearly 70%. DOL is making this change despite the last increase occurring only four years ago. DOL also has proposed automatically updating the minimum salary every three years going forward.
This massive increase to the salary level followed by automatic increases every three years will have an extremely negative impact on our industry and the economy. Employers would be faced with crushing increases in labor and administrative costs and the American people would see jumps in prices for goods and services as well as diminished customer service. At the same time, employers need to track hours of nonexempt employees, so employees who are reclassified from exempt to nonexempt could lose workplace flexibility, including the ability to work remotely, and workforce development opportunities, such as the ability to attend conferences or classes outside of normal work hours.
If you are attending the GTE show this year, be sure to come to put the TIA Right to Repair/Electric Vehicle (EV) Forum on your schedule of events. The forum will take place on Monday, Oct. 30, the day before the opening of the Global Tire Expo/SEMA Show this fall in Las Vegas.
TIA is inviting key industry stakeholders, including tire dealers, manufacturers, suppliers and activists to participate in an engaging, open discussion of these important topics. The Forum will take place from 1:30 p.m. – 3:00 p.m. in Melrose 4 at Planet Hollywood Las Vegas Resort & Casino.
These are two of the hottest issues on the minds of tire industry business owners today. In fact, some tire dealers believe passage of right to repair legislation is crucial to the very survival of the independent tire and automotive service aftermarket.
Speakers from TIA and the Specialty Equipment Market Association will lead the right to repair discussion, while members of TIA’s Electric Vehicle Advisory Council will conduct the forum on EVs.
TIA also will provide lunch prior to the Forum for those who are interested.
For more information and/or to sign up for the Forum send an email to me at: rlittlefield2@tireindustry.or