Tax Relief For American Families and Workers Act passes out of House Ways & Means Committee
The Act is now ready for the House to vote on it the week of January 29 (MAYBE)
The Tax Relief for American Families and Workers Act was passed by the House Ways and Means Committee on a 40-3 vote. Only 3 Democrats voted against it since, in their opinion, it did not increase the child tax credit enough.
Democrats continue to harp on the Republicans not increasing the child tax credit even though it is the Republicans that 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.
The major item that applies to 2023 returns for farmers if this pass is that 100% bonus depreciation is allowed on 2023 returns. Therefore, you may not want to file any farmer’s return until you see if this Act is passed sometime in February. This is another key reason to make a January 15 farmer’s tax estimate and not try to file by March 1. These late Tax Acts seems 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 December 31, 2023. Therefore, it will not affect any current 1099 filing requirements. There is no retroactive provision.
Some tweakage on the ERC promoter penalties. First, if a farmer received an ERC credit that was prepared by a firm deemed to be a “material advisor”, 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 advisor, 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 advisor” 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 may fall under the same definition since that dollar amount will be a % of the credit. If this Act passes, the IRS will issue Regulations, but they may 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 may happen in the first couple weeks of February. We would hesitate to file any income tax returns that have items that might be affected by this Act (which primarily 100% bonus depreciation for most farmers).