Senate Bill Deal to Expand EV Tax Credits (7/27/2022)

[ARK]

Perhaps, but I'm not quite sure how they'd do that when the trigger for this scenario is whether the buyer had a binding order or not before they went on to complete the purchase and claim the tax credit. It just doesn't seem like a detail that would exist anywhere in a database for the IRS computers to find it. I think it's usually just the sale (and subsequent registration) itself that gets recorded in state or federal databases.

Yes, I think that's right. Perhaps they will ask for a submission with the tax form?

They will probably have a decent sense too. Like for example, Rivian and Fisker offered the same contract for everyone. If, for example, they make an internal decision that neither of those contracts qualify, they could probably easily have their system flag a Rivian or Fisker VIN as being claimed for the grandfathered tax credit when it should not be.

Other companies just wouldn't offer a contract at all without the car present. I think BMW had a blanked policy for this, so if someone claims a Bimmer VIN, same story for the IRS.

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[kennethjk]

Perhaps, but I'm not quite sure how they'd do that when the trigger for this scenario is whether the buyer had a binding order or not before they went on to complete the purchase and claim the tax credit. It just doesn't seem like a detail that would exist anywhere in a database for the IRS computers to find it. I think it's usually just the sale (and subsequent registration) itself that gets recorded in state or federal databases.

It is possible that they could ask for a copy of the binding contract when filing your tax return. I believe the new legislation said you make an election to treat the old law in effect if you have a binding contract. You check a box making that election and it might require a copy of the contract to be filed with the return.

 

[kennethjk]

they will probably be focusing on the bigger fish. Partnerships, S Corporation's and larger corporations. Even high income earners who are just W2 won’t have to worry about much since not much they can do.

most catches by the IRS are automated. auditors will be needed for answering phones, questions by taxpayers, audits of larger business , cash businesses etc.

very few people have anything to worry about , unless of course they are cheating and doing something illegal.

 

[Shelbeast]

To be fair, there are observable facts.

But what you’re asking for are exact specifics, and that’s going to be difficult if not impossible.

It’s like (and is) predicting the weather.

Just because the weatherman can’t tell you with absolute certainty that it’s going to rain at your house today, doesn’t mean there is no validity to weather reporting. Knowing if there is an 80% chance of rain today vs 10% tells me if I should go to the beach.

With climate? We know with absolute certainty at this point that carbon emissions (greenhouse gases) are manmade. We know what effect they have. We know how much we pollute. And we know it contributes to warming. We also know if we reduce them “it’ll help” slow the warming trend.

Now how much exactly? It’s not exact. The answer is “some.”

But just because you’re not responsible for all the trash in the ocean, doesn’t mean you shouldn’t remove “some.”

I’m not going to dedicate my life to removing trash. And I’m not going to yell at people and try to scare them about ocean trash. But I’m willing to not throw extra garbage in the ocean.

Thanks. Very well written. I agree we don't know how much we affect it and that is where I stand on the issue. I do agree with a term global dimming due to carbon. And until everyone is onboard, it wasted talk. I still want to see the observable science once thy have it.

Not trying to be funny, but I think there is some truth in the cow farts theory. Along with making areas into swish cheese from drilling will certainly will hurt the planet. The planet will certainly kill us before we kill it. Our fate is in our hands and we will reap the just deserts.

 

[RedStallion]

Definitely they are going after defenseless small businesses. Big corporations have an army of lawyers and lobbyists, they don't need to cheat on taxes, they use loopholes the size of an elephant. In fact, taking out the carried interest provision from the Inflation Corruption Bill shows who is in control.
The small businesses are very vulnerable, they work on small margins and taxes for them is a big deal, so they are trying to squeeze everything possible. Now IRS will hunt them for each deduction, even if they are correct, because it's cheaper to pay penalties than take IRS to court. Fed will push CBDC next year which is easily traceable curbing cash transactions.
Government and large corporations are not in favor of small businesses, they are too independent and too many of them and are an obstacle to total government control. Farmers are not allowed to use water, others were prohibited from working in 2020 and onerous burdens of regulations put on them. Now the IRS will decimate those that survived.

 

[Mach1E]

Definitely they are going after defenseless small businesses. Big corporations have an army of lawyers and lobbyists, they don't need to cheat on taxes, they use loopholes the size of an elephant. In fact, taking out the carried interest provision from the Inflation Corruption Bill shows who is in control.
The small businesses are very vulnerable, they work on small margins and taxes for them is a big deal, so they are trying to squeeze everything possible. Now IRS will hunt them for each deduction, even if they are correct, because it's cheaper to pay penalties than take IRS to court. Fed will push CBDC next year which is easily traceable curbing cash transactions.
Government and large corporations are not in favor of small businesses, they are too independent and too many of them and are an obstacle to total government control. Farmers are not allowed to use water, others were prohibited from working in 2020 and onerous burdens of regulations put on them. Now the IRS will decimate those that survived.

Lots to digest, but you said some important things.

For one: “they don’t need to cheat on taxes……”

Well, yeah, big publicly traded corporations are open books, by law. And if they aren’t cheating, nothing to go after.

“They use loopholes.”

I always laugh at the phrase “tax loopholes.”

Know the difference between a “tax strategy“ and a “tax loophole?” The only difference is if the person saying it hates the loophole or likes the strategy!

Honestly? They should go after small businesses. Those are the ones most commonly breaking the law. Under reporting income, cash under the table, and business expenses that aren’t business expenses. It’s waaaaaay too commonplace to cheat on your taxes as a small business.

 

[ARK]

Honestly? They should go after small businesses. Those are the ones most commonly breaking the law. Under reporting income, cash under the table, and business expenses that aren’t business expenses. It’s waaaaaay too commonplace to cheat on your taxes as a small business.

That’s exactly right. Small businesses are great, they create many jobs in the local community and all that. But at the same time, as much as big chains get criticized from some people in the country, it’s the small businesses (often the ones where there are a couple of dozen or so employees, owners are multimillionaires but by no means flying on private jets) that are doing the straight illegal and fraudulent things.

No one in the IRS is going to care if you stopped at the dry cleaner between the office and worksite and claimed the whole trip as a business expense. Someone at the IRS will care if your $7 million a year business is paying $2 million a year in rent to your brother’s spouse’s corporation for a one story office building, and that corporation is perpetually showing a loss or whatever. Those are the people who really are the ones who are looking at greater scrutiny with this.

 

[kennethjk]

Lots to digest, but you said some important things.

For one: “they don’t need to cheat on taxes……”

Well, yeah, big publicly traded corporations are open books, by law. And if they aren’t cheating, nothing to go after.

“They use loopholes.”

many of those loopholes the large company’s take are in fact contrary to law or legislation. Many areas of tax law are vague and lawyers and CPAs push the envelope. When the IRS makes adjustments they are in the millions of $’s

You and @ARK are 100% correct regarding small business. They are great entrepreneurs and innovators and employ a lot of employees but they can be involved in a lot of cash transactions, paying money to employees without those employees paying tax on that money, etc etc.

my standard comment is, if everyone really paid their fair share of tax on their income, our taxes could be cut in half.

 

[Mach1E]

many of those loopholes the large company’s take are in fact contrary to law or legislation. Many areas of tax law are vague and lawyers and CPAs push the envelope. When the IRS makes adjustments they are in the millions of $’s

You and @ARK are 100% correct regarding small business. They are great entrepreneurs and innovators and employ a lot of employees but they can be involved in a lot of cash transactions, paying money to employees without those employees paying tax on that money, etc etc.

my standard comment is, if everyone really paid their fair share of tax on their income, our taxes could be cut in half.

Agreed on the “gray areas.”

However, if the IRS makes adjustments in an audit, those weren’t “loopholes,” they were straight up tax fraud.

Typically “loopholes” are LEGAL strategies that don’t seem “fair.” But they’re legal. No IRS adjustments necessary.

I’ll give a couple examples.

ACA health insurance subsidies. They’re based on taxable income, NOT net worth.

So a retired millionaire can get free health insurance. How? Live on their cash. Many people do this. Definitely not the ACA intention, but very legal. Why not use net worth? Hot mess to qualify. Medicaid uses net worth and income and it’s a huge mess. Couldn’t do that efficiently on a federal lvl.

Another “loophole,” is corporate tax rates. Pay yourself as income as a biz owner and you could pay 40+ % in taxes. Pay as a corporation and pay 21% flat tax. Totally legal.

 

[kennethjk]

Agreed on the “gray areas.”

However, if the IRS makes adjustments in an audit, those weren’t “loopholes,” they were straight up tax fraud.

Typically “loopholes” are LEGAL strategies that don’t seem “fair.” But they’re legal. No IRS adjustments necessary.

I’ll give a couple examples.

ACA health insurance subsidies. They’re based on taxable income, NOT net worth.

So a retired millionaire can get free health insurance. How? Live on their cash. Many people do this. Definitely not the ACA intention, but very legal. Why not use net worth? Hot mess to qualify. Medicaid uses net worth and income and it’s a huge mess. Couldn’t do that efficiently on a federal lvl.

Another “loophole,” is corporate tax rates. Pay yourself as income as a biz owner and you could pay 40+ % in taxes. Pay as a corporation and pay 21% flat tax. Totally legal.

We probably could discuss loopholes for a while but at the end of the day we would probably agree.

the problem with basing any tax on wealth is that it just isn’t easy. I don’t consider what the ACA as a loophole but doesn’t really matter. Asking people to appraise all their property every year to determine their wealth is crazy, like Elizabeth Warrens plan. Not workable.

Regarding what is called a C Corporation ,when leaving profits in the business they are only taxed at 21% as you say but if the shareholder wants to take that money out as a dividend they pay another 20% plus. In effect people are paying 21% when leaving 100k in the corp. and then another 20+% when taking the money out, really almost the same. People leave profit in a corp for capital expansion etc.

easy to avoid the double taxation by making the C Corp an S Corp. Not a loophole but just something allowed in the the Code for small businesses Even though many aren’t that small.

just hoping everyone pays their fair share.

 

[dbsb3233]

So a retired millionaire can get free health insurance. How? Live on their cash. Many people do this.

Technically possible, but usually not the case. Someone with a lot of after-tax savings usually invests it rather than having it sit without making money on it. If you don't have it somewhere making gains, you waste much of, and lose ground to inflation.

And those investment gains usually generate taxable income. The more savings one has, the more taxable gains (income).

I'm kind of in that boat (although certainly not in the "rich" stratosphere). Retired early from a self-employed venture with a good nest egg built up. Most of it in tax-deferred savings but also a chunk in after-tax. When I withdraw from the IRAs (for living expenses), it generates taxable income. When I invest the after-tax savings, it generates taxable income. Even though I have no paycheck income and no pension income, I still generate around $60k-$80k of taxable income annually, just like someone with a regular job. It's just more variable from year-to-year since the stock market varies more.

 

[Mach1E]

Technically possible, but usually not the case. Someone with a lot of after-tax savings usually invests it rather than having it sit without making money on it. If you don't have it somewhere making gains, you waste much of, and lose ground to inflation.

And those investment gains usually generate taxable income. The more savings one has, the more taxable gains (income).

I'm kind of in that boat (although certainly not in the "rich" stratosphere). Retired early from a self-employed venture with a good nest egg built up. Most of it in tax-deferred savings but also a chunk in after-tax. When I withdraw from the IRAs (for living expenses), it generates taxable income. When I invest the after-tax savings, it generates taxable income. Even though I have no paycheck income and no pension income, I still generate around $60k-$80k of taxable income annually, just like someone with a regular job. It's just more variable from year-to-year since the stock market varies more.

It’s not just technically possible.

I work with many people purposefully doing it.

It’s fairly easy to do.

In your example above, if retired under age 65 and wanted free health insurance, you would just NOT take IRA distributions. You’d live on your non-qualified money or Roth money.

And in a year like this year (market down), you could control your AGI even more with some tax loss harvesting in your non-qualified accounts.

Another reason to consider delaying social security benefits while doing this too, to keep income down.

Get that $60k in income down to around $30k and POOF….. free health insurance. You do this until 65 then switch to Medicare and don’t worry about income limits until you with the 175k range where your Medicare premiums would go up.

Tons of tax strategies in there.

 

[kennethjk]

It’s not just technically possible.

I work with many people purposefully doing it.

It’s fairly easy to do.

In your example above, if retired under age 65 and wanted free health insurance, you would just NOT take IRA distributions. You’d live on your non-qualified money or Roth money.

And in a year like this year (market down), you could control your AGI even more with some tax loss harvesting in your non-qualified accounts.

Another reason to consider delaying social security benefits while doing this too, to keep income down.

Get that $60k in income down to around $30k and POOF….. free health insurance. You do this until 65 then switch to Medicare and don’t worry about income limits until you with the 175k range where your Medicare premiums would go up.

Tons of tax strategies in there.

Insurance may be free in the scenario you mention but how good is it?

 

[Mach1E]

Insurance may be free in the scenario you mention but how good is it?

You pick the plan.

In the above scenario, you get a “credit” of a few hundred $$ to near $1000/mo off your health insurance plan.

Then you pick the carrier and plan out of hundreds on healthcare.gov.

It’s regular health insurance. Blue cross, Aetna, United healthcare etc. HMO, PPO, your choice.

You can do low deductible, high deductible, whatever. Literally hundreds of options.

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