A massive new tax law costing $739 billion was enacted to promote green energy, aid Medicare recipients, and increase funding for the IRS (P.L. 117-169). It was signed into law on August 16, 2022. To pay for the measure, the key provision is a 15% corporate alternative minimum tax on book income of businesses with average annual earnings over $1 billion in the 3 prior years (about 200 companies in all) and a 1% excise tax on stock buybacks from certain publicly-traded companies. These two revenue raisers do not directly impact individuals, but may have indirect consequences.
The following is a brief overview of the tax provisions specifically for individuals:
The IRS was given $80 billion in funding, part of which is supposed to be used for enforcement. While Treasury Secretary Yellen promised that households with income below $400,000 and small businesses won’t see an increase in audit rates, there is no way to guarantee there will not be more scrutiny of all taxpayers.
Advance payment of current tax liability based either on wage withholdings or installment payments of your estimated tax liability. To avoid penalties, you generally must pay to the IRS either 90% of your final tax liability, or either 100% or 110% of the prior year’s tax liability, depending on your adjusted gross income.