8/28/2023 0 Comments Retroactive tax law changes 2021Notwithstanding taking effect only last month, the CREATE Law expressly provides that the said tax rates were effective 01 July 2020. The CREATE Law became effective on 11 April 2021. Under the Tax Code, they are required to file and pay quarterly income tax returns within 60 days following the close of each of the first 3 quarters of the taxable year and the final adjustment return either on or before the 15th day of the fourth month following the close of their Fiscal year.Īside from the usual frenzy surrounding the filing of ITRs, this year’s filing has been affected by the enactment of the Corporate Recovery and Tax Incentives for Enterprise (CREATE) Law.Īs part of its efforts to assist companies undergoing financial crisis during this pandemic, the legislature passed the CREATE Law which introduced lower corporate income tax rates, lower minimum corporate income tax rate as well as a lower corporate tax rate for proprietary or non-profit educational institutions and hospitals. These taxpayers utilize a fiscal year as their taxable period, wherein their taxable periods end in any month except for December. However, there are taxpayers who do not file their annual income tax returns on April 15 but on another date, either earlier or later than April 15 every year. Taxpayers who are using the calendar year accounting period have already filed and paid their annual income tax returns on the said date. We are engaging in strategic litigation on retroactive changes and will review changes such as this one should it be enacted into law.By this time, the frenetic pace for the April 15 deadline for filing of the annual income tax returns (ITRs) has already simmered down. A newer Court with new justices may decide differently and more favorably to taxpayers. Supreme Court in 1995, when they last considered the issue, came close to deciding that anything beyond one year of retroactivity violates due process. Government likes retroactivity because it extracts revenue from past periods when taxpayers cannot change their behavior to avoid increased tax. Most people are shocked to learn that retroactive taxation is not only permissible under current law, but widely practiced. (This is all separate from the proposal to increase IRS enforcement funding by $80 billion.)Ī long-term goal of NTUF’s Taxpayer Defense Center is to end retroactive tax increases. The revenue estimate ominously has larger collections in the first two years, presumably from retroactive collections where the IRS attempted to impose penalties in violation of this law. The Joint Committee on Taxation estimates that this change will raise $1.4 billion over ten years in extra penalty collections, showing that IRS agents’ failure to get supervisory approval is hardly a small problem. Needless to say, this is a very disturbing proposal that will potentially reopen 20 years of cases that taxpayers think they have won. The bill was then adopted by overwhelming votes of 402 to 8 in the House and 96 to 2 in the Senate. NTU worked hard to add the provision after seeing the results of IRS agents going rogue with the enormous power and pressure they can use against taxpayers. The supervisor approval requirement was added as part of the IRS Restructuring & Reform Act of 1998. Instead, IRS supervisors will have to write a quarterly letter certifying that their employees are following the rules. It may sound like an easy step, but inappropriate or excessive penalties are thrown out all the time because the IRS forgot to have the supervisor approve it first.īuried on page 709 of the House Democratic tax bill released yesterday is a provision repealing this supervisor-approval requirement, retroactive to January 1, 2001. Under federal law, any tax penalty must be approved by an IRS supervisor before being assessed on a taxpayer.
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