20 LONGISLANDPRESS.COM • FEBRUARY 2022
TAX TIME ARRIVES WITH MANY TRANSFORMATIONS
“Corporate income taxes are at a historical
all-time low of 21% (flat rate) since
the enactment of the Tax Cuts and Jobs
Act in 2018,” said Ronald Burton Jr.,
a partner at Marcum LLP, based in
Melville. “Prior to 2018, corporate tax
rates were based on a tiered structure.”
Others also said that tax rates tumbled,
leaving companies with a lower
tax burden in 2021 than they historically
had with the highest bracket of
income taxed at 35 percent.
“It’s a dramatic reduction for a company
that generates a lot of revenue,” said
Raymond J. Holst, a tax and corporate
lawyer at Meltzer, Lippe, Goldstein &
Breitstone LLP in Mineola.
An increase has been floated that could
raise rates substantially. Burton believes
tax rates could reach 26.5 percent,
while Holst also sees possible
hikes. “The Biden administration, obviously,
would like to raise revenue,”
Holst said. “Realistically, if there is any
movement, there may be an appetite to
go to 25 percent on the corporate side.”
Rates could be raised through the reconciliation
process, requiring only
a majority of support, but even that
would require buy-in from Democrats.
And it’s hard to tell what Congress’
makeup will look like following
the upcoming midterm elections.
“If you keep seesawing the tax rate, it
just makes it that much more difficult
for businesses to plan and run efficiently,”
Holst said. “They have that
change of law risk outstanding that is
very difficult to price.”
Burton said there has been more
change than usual, generating more
uncertainty for companies. “The constant
tax laws changes and the global
pandemic have added a significant
amount of new work,” Burton said,
“but this a great opportunity for the
profession.”
For U.S. companies with offshore subsidiaries
that use intellectual property,
the term GILTI or “global intangible
low-taxed income” has come into play.
This new tax regime imposes U.S. taxation
on certain income related to intangible
assets. “The income generated by
those assets can no longer remain offshore
and not be subject to U.S. federal
income tax,” Holst added.
The infrastructure bill passed in November
2021 included a provision imposing
Form 1099 reporting on cryptocurrency
transactions, a large, potentially growing
aspect of commerce that interests
the IRS.
“Treasury says there is a yearly $600 billion
tax gap, the amount of taxes paid
versus what should be paid,” Holst said.
“They believe there are a lot of transactions
in crypto that are not being reported
and taxed correctly.”
The 1099 reporting of these transactions,
including cost basis and gains, will begin
in 2023. “When an investor changes
from one type of crypto to another, that’s
a transfer of one piece of property for
another,” Holst said of such exchanges.
“You have to recognize any built-in gain
at the time of the exchange.”
As more people work remotely, laws regarding
taxation based on work location
can matter more. New York State
law generally provides that if a New
York company requires an employee
to work outside of New York, the employee
isn’t subject to New York taxes.
If the employee chooses to work outside
of New York, but is not required to,
the employee remains subject to New
York taxes.
“If you just want to work from home and
not commute, they’ll tax you,” Holst said.
“I expect New York will try to raise revenue
lost as a result of Covid by auditing
and taxing these remote workers.”
During the pandemic, many people
moved from New York to states with
lower and, in some cases, no state income
taxes. That will mean a very different
tax year for them and less revenue
for New York.
While students may get some loan relief,
possibly through executive action, Holst
said it’s unlikely to be as much as discussed.
“I think it would be a hard thing
to get passed,” he said of entirely erasing
student debt.
Companies often got Paycheck Protection
Program loans, a bright spot in a
year clouded by Covid-19, through the
Small Business Administration. If a
company is sold or has certain other
changes in ownership before the loan is
forgiven, the amount of the loan generally
must be put into escrow.
“This is something that should be addressed
as early as possible, if they’re
thinking of a change of control transaction,”
Holst said.
Proposals regarding changing trust and
estates law “scared a lot of people into
action in 2021,” Holst said. However,
those proposals, including lowering the
trust and estates exemption amount,
have yet to become law.
“My firm was firing on all cylinders until
the end of the year,” Holst said. “Everybody
wanted to put their trust and estates
plan into effect in 2021.”
While the pandemic brought health and
economic costs, Holst said in 2021, from
a tax perspective, many things went
right. “We have issues,” Holst said. “We
shouldn’t let our guard down. But if you
look at it, we’re in a pretty good place.”
While regulations are in flux, Burton
said that is prompting accounting firms
to keep in close contact with companies.
“Since there is so much uncertainty and
nobody knows when or if there will be
more new tax laws, we have been in constant
communication with our clients,”
Burton said.
PRESS BUSINESS
continued from page 19
‘Tis the season to seek help with tax filings. (Getty Images)
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