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The IRS is looking to close a tax 'loophole' that has been primarily used by the wealthy. They estimate that they will be able to raise $50 billion in revenue with this change.
According to the Associated Press "The proposed rule and guidance announced Monday includes plans to essentially stop “partnership basis shifting” — a process by which a business or person can move assets among a series of related parties to avoid paying taxes." (Boak, 2024)
It is sad that verbiage like "...to avoid paying taxes" is being used as if avoiding taxes is illegal.
What is the difference between tax evasion and tax avoidance?
Tax evasion is the failure to make a timely payment or to make a payment with the intention of underpaying.
For example: If you have a tax bill of $4,000 and you deliberately pay only $3000. That is tax evasion.
Tax avoidance is when you find legal policies and take certain actions to either maximize your after-tax income, or to lessen your tax liability.
For example: If you your taxable income is $90,000 and you contribute $5,000 to your Individual Retirement Account (IRA), assuming you are eligible for the deduction, and it lowers your taxable income to $85,000.
Tax evasion is not the same as tax avoidance. They simple used the tax loophole.
What is a tax loophole?
A tax loophole is a provision in the tax code that allows the tax payer to reduce their tax liability.
That is what makes this policy scary because once they come for the wealthy, they are coming for the general public.
There are many tax loopholes that the average taxpayer takes advantage of including but not limited to:
Traditional IRA tax contributions
Back-door Roth IRA conversions
Child Tax Credits
Lifetime Learning Credits
Long-Term Capital gains
When executed properly, each of these strategies can lower your tax liability in a given year.
By definition, these are tax loopholes. They are a way of avoiding paying higher taxes.
So when the government tries to close these loopholes, it is scary because once they close them up, they are coming for the other ones as well.
And the only reason they want to audit, is to get some of that money back from years passed.
How far back does the IRS go to do an audit?
Typically, the IRS will only go back as far as three years. But in certain situations they may extend this time to 6 years. Once again, this is the federal government, these are just guidelines. Technically, they can go back as far as they need to.
With that said, according to the IRS website, they try not to go back further than 2 years. The goal is to audit returns as soon as possible.
What is this $50 Billion Loophole that the IRS is trying to close?
According to the recent U.S. Department of Treasury Press Release they report that major companies are entering into a set of transactions that manipulate partnership tax rules to maximize tax deductions and minimize tax liability.
For example, "...a partnership might shift tax basis from property that does not generate tax deductions (such as stock or land) to property that does (such as equipment). Taxpayers may also use these techniques to depreciate the same asset over and over. "(IRS.gov)
Why are they trying to close the loophole for the wealthy?
They are trying to close the loophole for the wealthy because they believe they are losing out on billions of taxable income. They state that the IRS was underfunded in previous years and didn't have the money to uncover these complicated schemes to avoid taxes.
Now they are proposing to raise the audit tax up to roughly 26.6% up from 8.8% to make the money back.
Yet, instead of finding ways to better manage the money they already tax, they think that raising taxes will solve the problem.
But you can't fill a cup with a hole in it, by adding more water. You have to close the hole.
Sadly, they are trying to convince us, that the hole in the tax cup, is from people not paying taxes, and not from some politicians mismanaging money.
So what is the point of making this breaking news?
They are trying to divide Christian Americans
In a recent episode of Financial Advisors Say the Darndest Things, I break down this recent press release and how society tries to separate us.
Democrat vs Republican. Conservatives vs Liberals. Blacks vs. Whites. Men vs. Women. The wealthy vs the poor.
I speak about the Willie Lynch Letter And The Making of a Slave and compare his tactics on creating obedient slaves, to how the government is making us slaves to these tax policies.
They benefit when we don't know our rights.
They are trying to scare us into not taking advantage of the tax breaks that they put into place.
If these tactics were illegal, they would put these business owners in jail. But they are not, they are 100% legal and all they can do is close the loophole.
That should tell you everything you need to know.
So listen in, as I discuss the recent proposal by the US Treasury Department to close a major tax loophole for wealthy taxpayers, aiming to raise $50 billion over the next decade.
I emphasize the importance of understanding the true impact of such policies and the division they create among citizens.
I critique the government's approach and encourage listeners to seek financial wisdom and unity in their Christian faith, and be one with God.
Click Below To Hear More
Christian Podcast Key Takeaways:
Understanding Tax Loopholes
The US Treasury's proposal targets the practice of partnership bias shifting, where assets are moved among related parties to avoid taxes. This method has become common due to years of underfunding the IRS, resulting in less oversight of wealthy individuals. By closing this loophole, the government hopes to raise significant revenue, but it also highlights the imbalance in tax audits focused more on the average citizen.
The Impact of Government Policies
Ridgeway argues that government misappropriation of funds is a bigger issue than tax avoidance by the wealthy. He questions the efficiency and fairness of increased taxes on the rich, given the government's history of misusing tax revenue. He encourages listeners to scrutinize policymakers and understand the broader implications of tax policies.
Division and Hierarchy
Drawing parallels with the Willie Lynch letter, Ridgeway discusses how division and hierarchy are used to control and manipulate. He warns against falling into the trap of viewing the wealthy as enemies and stresses that such divisions distract from addressing the real issues. Unity and understanding are key to overcoming these societal divides.
Christian Perspective on Wealth
As Christians, Ridgeway urges listeners to consider how they view wealth and taxes. He emphasizes that being rich in spirit and righteous in action should be the focus, rather than harboring resentment towards the wealthy. Understanding and compassion are essential in navigating financial and social issues.
Taking Advantage of Legal Tax Strategies
Ridgeway highlights the importance of utilizing legal tax strategies, such as contributing to IRAs and 401(k)s, to reduce taxable income and save money. These strategies are available to everyone, not just the wealthy. He encourages listeners to educate themselves or consult professionals to maximize their financial benefits and ensure they are not unfairly burdened by taxes.
Quotes
"The government wants you to believe the wealthy are the enemy, but in reality, the real issue is how the government misappropriates the taxes they collect."
"We are in an era of tribalism where if you are not like us, you are the enemy. And I am pretty much sick of it."
"As Christians, we need to focus on being rich in spirit and righteous in action. There is only one side that matters—God's side."
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As Christians, we were taught to be good stewards over our tithing and giving to the less fortunate. But when it came to our personal finances and investing we were left clueless on what the Bible says. What does the Bible say about managing debt, leaving a legacy, investing, and planning for your retirement? Mr. Christian Finance answers these and many other questions because we want to teach you how to become rich and righteous!
Meet A.B. Ridgeway:
A.B. Ridgeway, MBA, CPWA®️ (info@abrwealthmanagement.com) is the owner and Christian Financial Advisor with A.B. Ridgeway Wealth Management. With a decade in the finance industry, his goal is to give believers clarity around the most confusing topic in the Bible, money, and tithing. A.B. Ridgeway helps tithing Christians become cheerful givers but unlocking their money-making potential, so they can prosper and be the great stewards of the wealth God has entrusted them with.
*Disclaimer: This communication is not intended as an offer or solicitation to buy, hold or sell any financial instrument or investment advisory services. Any information provided has been obtained from sources considered reliable, but we do not guarantee the accuracy or the completeness of any description of securities, markets or developments mentioned. This is strictly for information purposes. We recommend you speak with a professional financial advisor.
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