As widely reported, significant changes to the Internal Revenue Service Code are being discussed and debated in various corners of Congress as part of President Biden’s infrastructure and spending plans. While these discussions have been going on for a long time, the unpredictable politics of this current situation prevents a solid forecast for tax planning purposes. Even if reliable information was currently available, the effective date for all tax-related enactments (i.e.
Circumstances That Need Your Attention
Despite this uncertainty, and at the end of the year, the most important thing is that you consider your own personal tax planning based on your individual circumstances. For example:
- If you have time flexibility for recording income and expenses, you should consider maintaining that flexibility for as long as possible this calendar year to allow certain income to be recognized as needed, based on the final tax bill from Congress in 2021 that could otherwise be recognized in 2022 when a higher tax rate may apply, and certain expenses may be incurred in 2022 that would otherwise be incurred in 2021. The opposite could happen if tax rates are not increased.
- If your income and / or financial circumstances have changed significantly, you should speak to your tax advisor immediately so that options can be examined in good time before the end of the calendar year.
- Even if your income and financial situation have not changed materially, but you anticipate potential changes in 2022 that will affect your personal circumstances, you should reconsider contacting your tax advisor to begin the process of discussing helpful options to start.
Proposed Build Back Better Act
On October 28, 2021, the House of Representatives published a law to change tax policy, the “Build Back Better Act”. Negotiations in Congress are ongoing and Congress is likely to make changes to this law. We certainly understand that this law, in its written form, lacks the votes necessary for Congress to pass. As soon as we are convinced that a bill has enough votes, we will provide an overview and comment on the relevant tax regulations.
Focus on year-end planning
In the meantime, please assess your individual circumstances to decide whether year-end calendar planning should be considered.