The GOP is targeting a controversial tax provision, which critics say benefits rich hedge fund managers and Wall Street types. According to a news report in The Hill, President Trump, during his campaign, said people using tax rules on carried interest are “getting away with murder.” The break generally benefits real estate investors, venture capitalists and some hedge fund managers. Still, language targeting this provision was absent from the tax reform proposal that the White House and congressional Republicans unveiled earlier this month.
What It All Means
Republicans, who have been criticized for coming up with tax plans that favor the rich, say absence of such language doesn’t mean changes won’t be coming. Congressman Tom Reed told The Hill that the wealthy “have done very well since 2008, and they may well have to pay a bit more.” Eliminating the tax break allows a portion of certain investors’ income to be taxed at lower capital gains rate rather than the higher ordinary income rate and would bring a few billion dollars more to federal coffers each year.
But, the issue of carried interest is not as much about raising money for the government as it is about fairness, or lack of it, members of both parties argue. Scrapping it could help Republicans make the case that the super rich won’t benefit from their plan. This would be particularly significant after the Tax Policy Center has found that the biggest tax cuts under the GOP’s proposal would go to the wealthy while the middle class sees its tax bill increase.
Significant Changes Are Coming
The new GOP framework proposes a number of dramatic changes to the tax code. This includes increasing standardized deductions for both single and married filers and doing away completely with itemized deductions. The change would also mean shrinking the number of tax brackets to three as opposed to the seven tax blocks that currently exist. Also, in what appears to be a partisan move, those in the blue states who tend to pay higher state taxes won’t be able to deduct state taxes in their federal returns. In addition, the Trump tax plan will also do away with the estate tax, which once again benefits the rich.
Overwhelmed by Tax Debt?
If you are overwhelmed by tax debt, depending on your financial situation, you may be eligible for a tax repayment plan through the IRS. You may be able to negotiate an installment agreement, an offer in compromise or a temporary delay of payment. An installment agreement is essentially a payment plan where you pay off your tax debt over a period of time. Usually, taxpayers make monthly payments. An offer-in-compromise allows to you negotiate with the IRS where some of your tax debt may be forgiven. If your offer-in-compromise is accepted, you only have to pay a portion of what you owe.
If your tax burden is significant, you may want to consider a debt consolidation loan to help you cover it. You may be able to combine a group of debts into a single payment, possibly at a lower interest rate and monthly payment. “Temporary delay” is an option for those who are unable to pay any portion of their tax debt because of a short-term financial hardship. In such cases, the IRS may grant these individuals a deadline extension.
If you find yourself overwhelmed by tax debt, the experienced Arizona tax attorneys at the Pew Law Center can help you understand your options. Call us for a free, comprehensive and confidential consultation.