The New Healthcare Budget and Tax Law – More Jobs – Working for the IRS
The IRS will be expanding in 2012 due to budget changes resulting from the new healthcare bill. The gist of their budget proposal is this: The IRS wants to hire new employees to help administer the new health care laws. These new full time IRS employees will not be auditors, they will actually be IT people and others hired to help "improve taxpayer service".
The budget includes the "largest set of tax law changes in more than 20 years, with more than 40 provisions that amend the tax laws." It also explains that the new laws will be phased in, not just dumped on us at once.
You also have the right to eliminate penalties if you can show that you acted in good faith and not in a way intended to avoid the IRS. Along the lines of the negotiation process, you have the right to make an installment agreement with the IRS. Even though they want their money now, and they want all of it, you have the right to pay it on terms that are less of a burden on you. In order to negotiate an installment agreement, you will need IRS Form 433-A, the Financial Statement which asks you for your income, expenses, assets, and liabilities and helps you figure out how much you realistically can pay.
In addition to these costs, the IRS will be making infrastructural changes to implement taxpayer service programs, which will cost about $50 million. They have even included a new $11.5 million need to manage the tanning excise tax.
You also can appeal any decision made by the IRS. Just as in any other legal case, you can argue your side again if you do not believe that the outcome was fair. Your appeal rights last for 30 days after the initial decision of an audit, although you may actually have to wait a year or so before coming before a judge.
In addition to deductibles, income exclusions can lower your tax bill. Some common examples include child support received, employer-paid retirement contributions, municipal bond interest, money and assets received by gift or inheritance, and up to $250,000 in home sale gains (or $500,000 if married). These will offer a lot of tax relief, so do not forget to include these in your taxes when you are filing!
To calculate the Alternative Minimum Tax (AMT), you start with your regular taxable income and add back some write-offs, income exclusions, and personal and dependent exemptions. This amount is then taxed at 26% or 28% depending on your income level. If this figure is higher than your regular tax, then you pay the AMT.
While the healthcare bill has been getting a lot of attention, the corresponding IRS expansion has not. However, the IRS knows it is necessary even though spending money on collection efforts is not exactly a popular idea.
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