Global Minimum Tax
US Treasury Secretary Janet Yellen is confident that a global minimum tax deal will pass reaching over 140 Countries. The United States along with several other nations endorsed this measure in an effort to combat corporate tax-cutting.
The Global Minimum Tax will ensure that big corporations pay a minimum tax rate of 15%, it also includes other guidelines that will ultimately make it harder to avoid taxation. One of these measures being Countries involved in the global tax can still set whatever corporate tax rate they want, but with a catch: If companies pay lower rates in a country other than their own, their home governments taxes the margin below the 15% minimum to make it equivalent. For example, if Company X were to move their operations to a country taxing 12% on corporations, their home country would tax an additional 3% making their corporate tax rate 15%, effectively maintaining the global tax minimum no matter where they are operating from.
ERC Potentially Ending Early
Many businesses took advantage of the Employee Retention Credit (ERC), which provides a 70% tax credit for wages paid to employees (up to a maximum of $7,000 per employee per quarter) through the end of 2021. However, the proposed infrastructure bill – as passed by the Senate – would end the ERC for wages paid after September 30th. This change would retroactively end the ERC likely dealing very damaging blows to businesses who’d incorporated this into their budgets, which is why many are asking this provision to be undone.
The Senate has passed the $1.2 Trillion Infrastructure Bill, however, House Democrats are still holding it up hoping for the passage of the larger $3.5 trillion version. If this $1.2 trillion bill does fully pass, businesses will likely face problems as the ERC is claimed on Form 941 (Quarterly Payroll Tax Return), by holding onto the federal payroll taxes withheld from employee wages. This may cause businesses to have to pay the withheld amount back to receive their credit upon filing, however, it would cause extra strain on companies with already tight funds. It is possible the IRS would provide relief for this situation, however, no confirmation.
IRS Overhauls FAQ Process for Tax Laws
This past week the IRS stated it will be updating its process on the frequently asked questions pages they post to their website on new tax legislation. This comes following the concerns on transparency of the potential impacts on taxpayers when the pages are updated or revised. The IRS will also be answering concerns about potential penalties for taxpayers who rely on FAQ pages by offering more clarity about their ability to rely on FAQ info to avoid tax penalties. This comes following a lot of issues had with the process this year with dealing with the economic fallout of COVID-19.
The IRS is now trying to make the process more transparent, providing announcements through news releases. In addition to this, the FAQ pages will now be dated, allowing taxpayers to identify the dates of changes made, the prior versions will also be maintained on the website now should someone need to go back for reference.