Goodbye to the IRS?

If there’s one thing lawmakers agree on, it’s that they disagree on a lot of things. That includes the tax code. The popular belief is that Democrats want to raise taxes while Republicans want to lower them. But in reality, the issue is a lot more complicated, and it’s not always split along party lines.

The current discussion around the FairTax Act of 2023 has raised some questions for taxpayers. The idea behind this proposed legislation is a national sales tax that would be applied across the board on consumer goods and services. But what does that really mean for American taxpayers? And how would something like that impact them?

Here’s What You Need to Know

Here’s a quick overview of the FairTax Act of 2023.

It would take the place of current income taxes. The FairTax Act of 2023 proposes a national sales tax that would take the place of income taxes, payroll taxes, and estate or gift taxes. Instead, there would be a national sales tax levied on taxable goods and services. This legislation would repeal certain parts of the Internal Revenue Code of 1986 (Subtitles A, B, C, and H) and replace them with The Internal Revenue Code of 2023.

It’s steep. The bill outlines a 23% tax rate for 2025 on all taxable goods and services. When this rate is combined with federal taxes, though, it’s closer to 30%. This would apply to everyone, regardless of income level, and would adjust every year after 2025.

There are exceptions. Some goods and services would be exempt from the new tax, including used and intangible property; property or services purchased for business, export, or investment purposes; and property or services purchased for state government functions. Most individual taxpayers won’t benefit from these exceptions.

Taxpayers would receive a rebate. U.S. taxpayers would get a monthly rebate known as a Family Consumption Allowance. The amount of the allowance would be based on family size and income.

Here’s where the money goes. The revenues generated by the FairTax Act of 2023 would be allocated to five categories: general revenue, the old-age and survivors trust fund, the disability insurance trust fund, the hospital insurance trust fund, and the federal supplementary medical insurance trust fund.

It’s not law yet. Although the bill has plenty of GOP support, not all party members are on board, so it’s considered unlikely to pass. Before it can be signed into law, it needs to make it through the House and the Senate, which has a Democratic majority. If it does manage to complete that journey, President Biden has said he will veto it. But it still has taxpayers wringing their hands in concern.

What Happens to the IRS?

At this point, you may be wondering what happens to the IRS if there are no more income tax returns to deal with. Essentially, the institution would go away. This bill also cuts off funding for the IRS after the 2027 fiscal year.

Do You Have Concerns?

If you have questions about the FairTax Act of 2023 or any aspect of your income taxes, Adams Accounting Solutions is the one to call. We stay on top of potential new legislation as it rolls out, so you don’t have to worry about keeping up with it yourself.

At Adams Accounting Solutions, we handle all aspects of tax planning and preparation. We help you devise a plan for managing your accounting processes throughout the year so that at tax time, you have everything you need to make the tax preparation process quick and easy. Don’t worry — we’ll work with you every step of the way!

Give us a call or stop by the office to learn more about our tax preparation services. We look forward to working with you!