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‘I think everybody’s taken a deep breath’: Biden didn’t get a ‘blue wave’ but here’s how he can advance his tax agenda



That pledge was premised on a “blue wave” where Democrats kept the House of Representatives and established a newfound majority in the Senate, which would go along with tax hikes.

One week after Election Day, Biden is the projected winner in the presidential race. Yet Republican Senators fill 50 Senate seats and Democrats have 48 (including two independents who caucus with them). A Jan. 5 runoff elections for Georgia’s two spots.

Democrats will keep control of the House of Representatives, albeit in a smaller margin after GOP candidates flipped several seats.

So what does this political churn mean for families thinking about their tax bill in a Biden era?

Not as much as a clear Democrat sweep, some observers say, but still possibly plenty — like more audits for the rich, Internal Revenue Service rule changes and some legislative deals relating to retirement savings and families with kids.

‘Sure, Biden might not get his laundry list of tax legislative priorities. But there is so much he can do just with staffing change at the IRS and Treasury, and regulations that move the ball forward on his agenda.’

— Caroline Bruckner, tax professor at American University’s Kogod School of Business

“Sure, Biden might not get his laundry list of tax legislative priorities,” said Caroline Bruckner, a tax professor at American University’s Kogod School of Business. “But there is so much he can do just with staffing change at the IRS and Treasury, and regulations that move the ball forward on his agenda.”

Others doubt Biden would rip up the rules, or they say he would do so at his peril.

But Jason Cain, chief wealth strategist with Boston Private, a private bank with almost $15 billion in assets under management, isn’t playing a guessing game.

The man with most of his clientele worth north of $50 million spent the fall and summer talking people “off the edge of the proverbial cliff.” At this point, “I think everybody’s taken a deep breath.”

But Cain expects more audits for top earners. “My advice to clients is, in that type of environment, we sure as heck better not be pressed up at the line between black and white.”

See also: Opinion: Will Biden’s 401(k) plan help you or hurt you?

This means portfolios and tax planning built on “established positions supported by regulations, IRS procedure or case interpretation,” Cain said. “I don’t want my clients to be establishing precedent one way or another.”

Here’s three ways Biden can still attempt to bring in more tax dollars from businesses and the well-off, while using the tax code to help those farther down the income ladder, with their benefits and pitfalls.

Don’t assume there will not be any new tax laws

“I think there are some very real opportunities,” said Mark Everson, a former IRS Commissioner who led the agency from 2003 to 2007, during George W. Bush’s administration. The coronavirus pandemic has underscored the importance of a domestic supply chain, said Everson, now vice chairman of alliantgroup, a tax consulting firm.

That means both sides of the aisle will weigh how they can expand company tax credits on research and development, as well as added incentives for manufacturing on American soil, he said.

Bipartisan deals might also come on expanded tax credits for families juggling work and kids, he said. That includes provisions like the Child Tax Credit, currently paying up to $2,000 per qualifying child, and the Child and Dependent Care Credit, now offering up to $3,000 in care expenses for kids and dependent adults or $6,000 for two or more qualifying dependents.

New tax laws could pertain to families juggling work and kids, and retirement savings.

“Things that promote work will be seen as worth considering,” Everson said.

The same goes for long-term financial planning. “There’s a lot of interest in both parties to do something to encourage people to save more for retirement,” said Howard Gleckman, a senior fellow in the Urban-Brookings Tax Policy Center.

There are already two bills with sponsors on both sides of the aisle. The “Securing a Strong Retirement Act” would, among other things, push the required minimum distribution to age 75. The “Retirement Security and Savings Act” would do the same in its list of provisions.

Then there’s Biden’s call for a 26% refundable tax credit kicking in for each dollar contributed to an IRA or 401(k).

Between all that, it’s possible Biden and lawmakers can find some common ground, he said. “Best case, some modest changes in 2021. Worst case is nothing, but I think that’s unlikely.”

Changes to rules and regulations?

After Congress passes tax legislation and the president signs it into law, it falls on the Treasury Department and the IRS to develop the regulations that flesh out these laws.

That’s another place where the Biden administration could tinker — for better or worse depending on the perspective.

‘There could be greater efforts at settling some the longstanding questions on the definition of a child for [Earned Income Tax Credit] purposes. There is room for substantial progress.’

— Pete Sepp, president of the National Taxpayers Union

There could be greater efforts to settle some the longstanding questions on the definition of a child for Earned Income Tax Credit purposes. “There is room for substantial progress,” said Pete Sepp, president of the National Taxpayers Union, a conservative-leaning non-partisan think tank.

The credit for low- and moderate-income working families has been hailed as a powerful anti-poverty measure, but Sepp said there are unclear definitions on who can claim a child and get the credit. That results in too many audits, Sepp said, gumming up the payments for too many people in bad need of money.

That’s a place where some added direction could do some good, he thinks. There are places the Biden administration should leave alone, Sepp thinks.

The Trump administration’s Tax Cuts and Jobs Act of 2017 lowered the corporate income-tax rate and temporarily decreased most income tax brackets. It also established tax laws surrounding the money U.S. multinational companies made on intangible assets held abroad, like patents and copyrights. The Treasury Department spent three years after that crafting rules on the tax’s specifics, according to Sepp.

‘It’s important to retain the independence of the IRS. For that reason I think the administration will tread carefully. I don’t think there will be a lot of regulatory changes.’

— Mark W. Everson, vice chairman of alliantgroup and a former IRS Commissioner

Biden wants to raise the corporate rate from 21% to 28%, but if he can’t do that, Sepp said his Treasury Department could theoretically rip up the rules on multinationals and go tougher.

But that would be ill-advised, he said. In the face of uncertain tax rules, companies might hoard cash they’d otherwise use on new hires. “Wherever the tip of the spear is aimed, the wound spreads to many more taxpayers,” he said.

Everson stressed the IRS is a non-partisan agency following the laws as written. “It’s important to retain the independence of the IRS. For that reason I think the administration will tread carefully. I don’t think there will be a lot of regulatory changes.”

Some regulations are ripe for change and can make a real difference for gig workers, said Bruckner.

For example, the Treasury Department has a rule saying platform companies that connect consumers seeking a service and sellers offering their service (like a car trip) have to provide the seller with tax paperwork on earnings. But Bruckner says the Treasury Department insists on a rule saying the companies only have to pass along the tax documentation for payment that exceeds $20,000 and 200 transactions.

‘It’s a really complicated issue, but it boils down to: The IRS can fix this. It doesn’t need an act of Congress.’

— Caroline Bruckner, tax professor at American University’s Kogod School of Business

That leaves a lot of workers in the dark on their tax obligations, Bruckner said, opening them up to audits and not giving the feds an accurate read on what the gig worker is paying into incomes taxes — and Social Security taxes, a number that, years later, will be used to determine the size of the worker’s Social Security checks.

“It’s a really complicated issue, but it boils down to: The IRS can fix this. It doesn’t need an act of Congress” to address a problem that’s “to the detriment of millions and millions of workers,” she said.

A Government Accountability Office (GAO) report dug into the issue earlier this year, and recommended a change in the rule at issue. IRS officials said they had to address “other priorities,” like rules and guidance on the Tax Cuts and Jobs Act, according to the GAO report.

Building up an IRS that’s ‘limping’

Another way Biden can fit the tax code with his campaign visions: Helping the IRS itself, an agency that acknowledges it’s been losing staff over the years. The IRS had 78,004 workers in fiscal year 2019, which includes almost 1,600 more full-time workers than the year before, but that’s still “well below” staff levels in decades past, the IRS noted.

“You can pass all the policies you want. If the IRS can’t administer them, then you’ve just undermined your policy,” said Nina Olson, the former National Taxpayer Advocate within the IRS.

‘If there’s one thing the CARES act has shown, it’s that the IRS is central to any economic recovery. Period. And we better make sure it can operate.’

— Nina Olson, former National Taxpayer Advocate within the IRS

The IRS distributed more than 160 million stimulus checks after March’s $2.2 stimulus bill. “If there’s one thing the CARES act has shown, it’s that the IRS is central to any economic recovery. Period. And we better make sure it can operate,” said Olson, the executive director and founder of the Center for Taxpayer Rights, a non-profit organization promoting due process for taxpayers.

The IRS didn’t respond to a request for comment, but Olson said the agency is “limping” on matters like customer support and IT systems.

She said the tax-collecting agency needs a budget that slowly but surely increase over the years — and a breather after a 35-day government shutdown from 2018 to 2019 disrupted operations, and then the coronavirus’s complications this year.

Read:The IRS says it still hasn’t opened more than 2 million returns this tax season

In July, lawmakers in the House earmarked $12.1 billion for the IRS in fiscal year 2021, up from $11.5 billion a year earlier. The Senate’s Appropriations Committee has put aside $11.5 billion. The chambers will have to hash out the differences.

IRS Commissioner Charles Rettig at a House Committee on Oversight and Reform hearing in October.

Toni L. Sandys-Pool/Getty Images

Some observers told MarketWatch they wouldn’t be surprised if the Biden administration wanted to stick with Charles Rettig, the IRS commissioner and a Republican who started in 2018 after a legal career defending individuals and businesses with tax disputes.

“If Biden wants more money for the IRS, better to have a Republican commissioner ask for it than a Democratic IRS commissioner ask for it,” said Gleckman.

More audits for the rich are likely a way the new administration will try to bring in more money, observers told MarketWatch. The government could have an extra $535 billion if audit rates return to their 2010 point and honed in on society’s 1%, according to one estimate.

See also: Trump has faced a decade-long tax audit — here’s how long IRS audits usually take and which taxpayers are most likely to get audited

Over the summer, the IRS announced plans to audit more wealthy taxpayers. But people like Olson and Everson say any future staff build ups aren’t just a matter of more funding. It takes time and training, they said.

Someone auditing EITC claims might need to have the social skills to talk with taxpayers and understand family dynamics, said Olson. But someone scrutinizing the super-rich’s returns might have to know about forensic accounting and tax laws — and accounting firms will pay a lot to hire these types of people.

One thing Biden “can do is start talking about public-service jobs, and have it look valuable that you do a stint in IRS for a time. Yes, you take a hit on salary, you have but benefit of a government job,” Olson said.

It is wise for affluent households to keep thinking about additional tax planning in the years ahead, Cain said. Who knows what tax laws could come after the 2022 midterm elections, the 2024 presidential race and the 2025 expiration of the Tax Cuts and Jobs Act, he added.

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My ex-wife passed away. I’m the beneficiary on her life insurance. Her family wants me to pay her funeral expenses and won’t leave me alone




I am 32, and just a month ago I found out that my ex-wife, whom I haven’t spoken to since we divorced, passed away tragically in a moped accident. My ex-wife had life insurance through her job. My ex-mother-in-law informed my father that my ex-wife had kept me as her beneficiary on her life-insurance policy, and her family wants the money for funeral costs, bills, etc.

Not only did my ex-wife have me on her policy as the primary (and only) beneficiary, she updated my home address on the policy after we divorced. Also, I found out through the insurance company that my ex-wife had two term life-insurance policies, one for me and one for my ex-sister-in-law.

I blocked my ex-in-laws, and now I received a threatening voicemail from a blocked number, so I’ve taken it upon myself to notify the authorities. I live in New York, I am remarried, and my divorce was very simple and easy. We left the marriage with what we came into it with. The life-insurance company approved the check in my name, and is sending it to my home.

Am I legally in the clear? I have not spoken to or bothered these people once since we divorced five years ago. I just want to be left alone and move on with my life.

Thank you very much in advance.

Best regards,

Fed-Up Ex-Husband

You can email The Moneyist with any financial and ethical questions related to coronavirus at, and follow Quentin Fottrell on Twitter.

Dear Fed Up,

First, I’ll deal with your life insurance concerns, and then the subject of your ex-wife’s funeral expenses.

The life-insurance policy was between your ex-wife and her insurer. It’s possible to overturn a life-insurance policy if it explicitly goes against the terms of a divorce decree, as happened in this case, but that too was a complicated lawsuit. Some states do have statutes that can revoke such beneficiary arrangements.

In “Kaye Melin and Metropolitan Life Insurance,” the children of the deceased were awarded the proceeds from the life-insurance policy, not the ex-wife who was named as beneficiary on the agreement. In that case, the law presumed that what her ex-husband wanted after their divorce was incorrect.

The ruling stated: “Thus, if a person designates a spouse as a life insurance beneficiary and later gets divorced, Minnesota law provides that the beneficiary designation is automatically revoked. At least twenty-eight other states have enacted similar revocation-upon-divorce statutes.”

‘I’m reluctant to say that you are ‘in the clear,’ given previous court rulings, and statutes in some states on the revocation of named beneficiaries post-divorce.’

I’m reluctant to say that you are “in the clear,” given previous court rulings, and statutes in some states on the revocation of named beneficiaries post-divorce. In your case, it seems clearer that your ex-wife wanted you to be the beneficiary. She did, as you say, update your address. It would be hard to see a more explicit sign of her intentions than that.

“Unless the policyholder of the life-insurance plan changes the beneficiary designation officially, the people originally named will remain the beneficiaries through the life of the policy,” according to Heban, Murphree and Lewandowski, a law firm in Toledo, Ohio. “Even if the policyholder was not on speaking terms with the individual upon his or her death, that beneficiary would still receive the income.”

“In the case of someone who divorced and remarried, the policy may name the first spouse as beneficiary. If the policyholder never changed the policy to reflect the divorce and remarriage, the ex-spouse could end up with the benefit. This can cause the current spouse and any children from the second marriage to dispute the beneficiary designation on the policy,” it adds.

But much, I suspect, would depend on what state you live in, and the specifics of your case.

On a separate issue, it’s difficult to glean from your letter whether your in-laws had little funds to pay for the funeral expenses, or were mad as hell that you were listed as beneficiary and felt you should contribute, or both. On the one hand, it seems like they are not in a state of mind to be reasonable and, chances are, if you did engage it would lead to further demands and acrimony.

Perhaps you could talk to your ex-wife’s lawyer and see if there is enough money to cover the costs of her funeral and, if not, you could make a contribution. But given the alleged harassing phone calls, their anger and grief, and their antipathy toward you, you would need to have all correspondence go through the attorney and refrain from any direct communication.

There is no excuse for their taking their grief out on you. Still, spare a thought for her family. If you are fed up, imagine how they feel.

The Moneyist: My boyfriend talked me into depositing my paychecks into his bank account, and paying for a car in his name. What can I do?

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 group, where we look for answers to life’s thorniest money issues. Readers write in to me with all sorts of dilemmas. Post your questions, tell me what you want to know more about, or weigh in on the latest Moneyist columns.

By emailing your questions, you agree to having them published anonymously on MarketWatch. By submitting your story to Dow Jones & Company, the publisher of MarketWatch, you understand and agree that we may use your story, or versions of it, in all media and platforms, including via third parties.

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These money and investing tips can help you when inflation is burning a hole in your wallet




Don’t miss these top money and investing features:

These money and investing stories, popular with MarketWatch readers over the past week, focus on helping you make sense of the recent spike in U.S. inflation. Understand how rising prices can affect your investment portfolio, and taking appropriate steps now to respond, can prevent unpleasant surprises later.

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No, you’re not crazy. Yes, CDC mask guidelines are confusing — should you stop wearing a mask in public or not?




Wear a mask. Don’t wear a mask. Make one. Buy one. Wear it outdoors. Wear it indoors.

Confused? You’re not alone.

So what’s the deal with the CDC’s new guidance? “Anyone who is fully vaccinated can participate in indoor and outdoor activities, large or small, without wearing a mask or physical distancing,” Dr. Rochelle Walensky, the director of the U.S. Centers for Disease Control and Prevention, said on Thursday. “If you are fully vaccinated, you can start doing the things that you had stopped doing because of the pandemic.”

Vaccines have helped to slow the spread of the coronavirus, and this appears to be a natural next step for Americans tired of masking up. “We have all longed for this moment when we can get back to some sense of normalcy,” Walensky said.

We are still far, far away from normal. You can take off your mask “except where required by federal, state, local, tribal, or territorial laws, rules and regulations, including local business and workplace guidance,” the CDC says. You still need a mask on buses and trains, in museums and most stores, possibly at your place of work, but not inside restaurants, except when you’re going to the rest room.

How do you know a maskless person is vaccinated? It’s an honors system. The CDC guidance gives less reason for people to abide by that old American Express slogan: “Don’t leave home without it.” People are leaving home without their masks, even in states that still require everyone — vaccinated or not — to wear them in outdoor public spaces, including on the streets of New York.

Many people are fed up, it seems. Little wonder: The CDC’s announcement took many health professionals by surprise: According to a New York Times survey, 29% of epidemiologists surveyed thought people would be wearing masks in public spaces for at least aanother year, while 26% said they believed people would do so for another year, and 26% said they thought mask wearing would continue in some form from now on.

‘You still need a mask on buses and trains, in museums and most stores, possibly at your place of work, but not inside restaurants, except when you’re going to the rest room.’

The change in CDC mask guidelines comes just over a year since the CDC said everyone should wear masks. In April 2020, the Trump administration and the CDC reversed their policies on face masks, and said all Americans should wear cloth face coverings and not — as officials previously said — just medical workers. Trump cited “recent studies,” while the CDC cited “new evidence.”

Fast-forward to Thursday. “I think it’s a great milestone, a great day. It’s been made possible by the extraordinary success we’ve had in vaccinating so many Americans so quickly,” a maskless President Joe Biden declared in the White House Rose Garden declared, citing the vaccines from Johnson & Johnson


and Moderna

“It’s going to take a little more time for everyone who wants to get vaccinated to get their shots. So all of us, let’s be patient with one another,” the president said.

Forgive the public for having mask rules fatigue. We’ve been on quite a journey. Studies earlier in the pandemic suggested that adopting the practice of mask wearing, one that was already accepted in many Asian cultures, would have saved tens of thousands of lives. Many Americans were understandably frustrated, but also eager to do anything they could to stop the virus.

‘So what’s the deal with the CDC’s new guidance?’

MarketWatch illustration

Flashback: Dr. Nancy Messonnier, director of the Center for the National Center for Immunization and Respiratory Diseases, said in a briefing on Jan. 30 last year, “The virus is not spreading in the general community. We don’t routinely recommend the use of face masks by the public to prevent respiratory illness. And we certainly are not recommending that at this time for this new virus.”

Three months later, New York Gov. Andrew Cuomo, a Democrat, ordered all New Yorkers to cover their faces in public when they can’t maintain a proper social distance. “You’re walking down the street alone? Great! You’re now at an intersection and there are people at the intersection, and you’re going to be in proximity to other people? Put the mask on.”

‘These are just guidelines from the CDC. It’s up to the states to decide what to do next. New Jersey and New York still maintain their mask guidelines in public spaces.’

The CDC’s latest mask announcement are just guidelines. It’s up to the states to decide what to do next. And that’s a whole other story. New Jersey and New York still maintain their mask guidelines when in public spaces. Gov. Phil Murphy, a Democrat, is examining the guidelines, a spokeswoman for his office said in a statement. Murphy, like many governors, wears a mask in his Twitter profile. Perhaps that tells us all we need to know.

Roughly half of U.S. states have some mask mandate. Alabama, Louisiana, South Carolina, Florida, Mississippi, Nebraska, and Texas, among others, had already removed their statewide mask mandates in public spaces and/or had not instituted one. Florida Gov. Ron DeSantis, a Republican, said Thursday he would grant clemency to gym owners who broke the mask mandate.

Texas Gov. Greg Abbott, a Republican, officially ended his state’s face-mask mandate in March, and allowed businesses to reopen, despite opposition from rival lawmakers and health professionals at the time. Gilberto Hinojosa, chairman of the Texas Democratic Party, described the move as “extraordinarily dangerous” and said it “will kill Texans.”

Cuomo, meanwhile, perhaps still reeling from this time last year when New York was the epicenter of the pandemic in the U.S., was definitive in maintaining current policy. Keep your masks on. “In New York, we have always relied on the facts and the science to guide us throughout the worst of this pandemic and in our successful reopening,” he said in a statement.

‘People take off their masks to make phone calls on the street in states where there is a mandate to wear them in public places, and they take them off while they are sitting outdoors eating.’

Vermont Gov. Phil Scott, a Republican, said his state will follow the CDC guidelines. “Later today, we’ll be updating Vermont’s mask mandate following the CDC’s updated guidance, announced yesterday,” he tweeted Friday. “This will mean those who are fully vaccinated no longer need to wear masks — indoors or outdoors — nor do they need to be concerned with physical distancing.”

In Nevada, Gov. Steve Sisolak, a Democrat, said the state updated its own policies on mask wearing to follow the CDC’s guidelines with immediate effect. Nevada Health Response added: “COVID-19 is still very much a threat in our State and many Nevadans may choose to continue using masks based on their and their families’ personal health concerns. Others should respect this choice.”

That statement, perhaps more than any other, illustrates the tension, fear and frustration not only with state laws and changing guidance, but with each other. People take off their masks to make phone calls on the street in states where there is a mandate to wear them in public places, and they take them off while they are sitting outdoors eating. Most people are doing the best they can.

In California, Gov. Gavin Newsom, a Democrat, said people should still wear masks in public spaces for now, but likely not after June 15 when the state fully reopens. “Only in those massively large settings where people around the world, not just around the country, are convening and where people are mixing in real dense spaces,” Newsom told KTTV.

“Otherwise we’ll make guidance, recommendations, but no mandates and no restrictions in businesses large and small.” Is that all crystal clear? I’ll leave that for you to decide.

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