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FINANCIAL PLANNING
INFLATION REDUCTION ACT EXPLAINED
by Cade Peterson, Financial Advisor
Reduction Act is a complex spending
package that has several moving parts. Rates have gone up and many people have felt this as they purchase a vehicle or a home. The problem we are seeing is that although rates are going up, inflation still isn’t coming down. The Inflation Reduction Act is aimed to do exactly what it sounds like, reduce inflation. Overspending with money we do not have is what created this 40-year high inflation figure in the first place. We printed trillions of dollars to stimulate
Reduction Act is going to be used to increase taxpayer services. If we look under the hood of the actual act itself, we find that $46 billion, or 58%, will be used to improve monitoring and compliance. Only $3.2 billion will be spent on improving taxpayer services, which pans out
to just 4%. Before I lay out where the money from this act is going, I’d like to list various amounts to be raised as revenue. According to a breakdown of the Inflation Reduction Act, $737 billion will be raised in revenue to counteract this spending. The estimations say that $222 billion will come from the
a year would receive more than 52,000
audits, but it isn’t only going to be wealthy Americans that feel pressure from the IRS moving forward. We are not in a position to be printing hundreds of billions of dollars and hoping to pay it back later.
PREPARING/AVOIDING AN AUDIT
Business owners, middle-class and low- income earners should be ensuring they are prepared for an IRS audit. Many of you, whether you’re a horse owner, trainer, vet, or small business owner in general can assume
The Inflation IRS agents, $80 billion of the Inflation Americans earning more than $1,000,000
the economy throughout the pandemic. The strategy to pay for the new expenditures is
to snag billions of dollars from taxpayers by conducting tens of thousands of additional audits. In this article, I’d like to break down the Inflation Reduction Act and give some CPA advised tips on how to not only prepare for an IRS audit, but potentially avoid one altogether.
The idea behind this package is to tax
the wealthy and keep them in check. It was recently brought to light that there will now be 87,000 new IRS agents. The current administration says that households making less than $400,000 per year won’t face higher taxes or audit rates. In addition to the 87,000
15% minimum corporate tax, $265 billion
in revenue from prescription drug pricing reform, $124 billion will be profited from IRS tax enforcement, $74 billion from a 1% stock buyback fee, and $52 billion for loss limitation extension. The overall spending is $437 billion and $369 billion of it goes to energy security and climate change, $64 billion is headed
to the affordable care act extension and the last $4 billion is going to western drought resiliency. The current administration claims a $300 billion total deficit reduction.
Here’s the bottom line – we are spending money we do not have. Spending more money is simply not the answer. It is estimated that
an audit is likely to happen. I have spoken to several CPA’s who are involved in the horse industry or deal with small business owners. A very important piece of advice that was given to me was documentation. The absolute best way to prepare for an audit is to document everything you possibly can. Horse racing
is our passion through and through but let’s remember that this is also a business. There is
a significant amount of money in this business. Take a look at the 2022 select yearling sale and you’ll see how high the prices are. Any money that you have coming in and going out needs to be documented. Be sure to document your tax returns as well. It may be wise to discuss with
76 SPEEDHORSE October 2022