Connect with us

Business

IRS gears up to go after ‘complex partnerships’ despite lack of clear definition on July 31, 2023 at 9:30 am Business News | The Hill

Published

on

The IRS is getting ready to go after what it calls “large, complex partnerships” as part of its push to pursue wealthy tax cheats with tens of billions of dollars in additional funding.

The IRS plans to double audit coverage for partnerships with $10 million or more in assets by fiscal year 2025 over fiscal 2021 levels.

Here’s how the IRS will spend its $80 billion funding boost

But new research from the government’s internal watchdog finds that the specific types of legal and commercial structures the IRS is targeting need to be more clearly defined in order to recoup the uncollected funds.

Advertisement

“IRS has not defined or developed guidance on what a large, complex partnership is or developed measures to ensure additional audits focus on such partnerships,” the Government Accountability Office (GAO) wrote in a report released Thursday.

Pinning down partnerships

Partnerships don’t pay taxes directly but pass their tax liability onto their owners through an IRS form K-1. They can be nested within other partnerships in networked or circular structures so complex they can resemble a tangle of spiderwebs or pieces of Byzantine jewelry.

This makes it difficult to audit them, as evidenced by atrophying audit rates.

Here’s what a free IRS e-filing tax return system could look like

Advertisement

“The lack of a definition presents a challenge as IRS seeks to increase its audit coverage of partnerships,” the report read.

In a response to the criticism, the IRS acknowledged the haziness in the definition and said it’s working to be more precise.

“We plan to perform additional research and analysis to better understand the characteristics and define partnership segments,” Douglas O’Donnell, the deputy commissioner for services and enforcement at the IRS, wrote in a letter to the GAO earlier this month.

Current IRS Commissioner Danny Werfel said earlier this month on a call with reporters that the public should expect more updates on how exactly the IRS is going after big partnerships soon.

Advertisement

“We’re … focused on increasing our exam coverage for complex partnerships,” Werfel said. “In our upcoming next briefing we’ll provide more details on that.”

“I’m looking forward to future updates,” he said.

Partnership boom expands the tax gap

The GAO analysis found that only 54 large partnerships out of more than 20,000 got audited in 2019, for a rate of 0.3 percent.

That is just a hair shy of the audit rate for people who make $25,000 a year or less. In 2007, the audit rate for large partnerships was more than quadruple that.

Advertisement

Tax gap rises as IRS finds amount of unpaid taxes is increasing

Partnerships have also exploded in recent years as a commercial designation within the economy.

In 2002, there were about 3,000 partnerships worth more than $100 million in the U.S. In 2019, there were more than six times that amount.

The number of partnerships worth between $1 billion and $5 billion dollars has increased more than tenfold during that period, and the number of partnerships worth more than $5 billion has increased more than eightfold.

Advertisement

Unreported business income on individual income tax — precisely the type of income that pass-through entities like partnerships allow — is one of the largest segments of the “tax gap,” the amount the government is owed in taxes each year but fails to collect.

The IRS estimated the tax gap for personal business income to be $130 billion annually for tax years 2014 to 2016, which was the last time the tax gap was formally measured, but it is likely much higher than that now.

The gross tax gap was about $500 billion in those years, but last year former IRS commissioner Charles Rettig said it could be as much as $1 trillion.

A two-tiered tax system

Tax experts have long looked askance at partnerships as a potential tax dodge.

Advertisement

“The IRS does not treat K-1 income the same way that it does reports of people’s wages filed on W-2 forms or the reports of income from dividends, interest, royalties and contract jobs reported on Form 1099,” veteran tax reporter David Cay Johnston wrote in a 2003 book on the U.S. tax system.

Black Americans likely audited at higher rates, IRS says

“IRS computers match every wage, dividend, interest, royalty and contract job report to what is listed on individual tax returns to make sure that every dollar earned in these ways is taxed. Not so partnership and K-1 reports,” he wrote.

The differential administrative treatment of partnership income is symptomatic of what Treasury Secretary Janet Yellen has described as the “two-tiered tax system” in the U.S.

Advertisement

“At the core of the problem is a discrepancy in the ways types of income are reported to the IRS: opaque income sources frequently avoid scrutiny while wages and federal benefits are typically subject to nearly full compliance,” she said in a 2021 statement on Congressional tax proposals.

​Business The IRS is getting ready to go after what it calls “large, complex partnerships” as part of its push to pursue wealthy tax cheats with tens of billions of dollars in additional funding. The IRS plans to double audit coverage for partnerships with $10 million or more in assets by fiscal year 2025 over fiscal…  

Continue Reading
Advertisement
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Business

Mexican Protests: Gentrification, U.S. Migration, and Rising Tensions

Published

on

Protests Erupt Over Housing and Migration in Mexico City

Mexico City has become the epicenter of growing unrest as hundreds of residents took to the streets on July 4, 2025, protesting against soaring rents, gentrification, and the increasing presence of U.S. migrants. What began as a peaceful demonstration quickly escalated, with incidents of vandalism and confrontations highlighting the depth of local frustration.

Key Drivers of the Unrest

  • Gentrification and Housing Crisis:
    Rents in popular neighborhoods like Condesa and Roma have surged by nearly 50% over the past five years, pricing out many long-term residents. Young people and families are particularly affected, with some forced to leave homes they have occupied for decades.
  • Influx of U.S. Migrants and Digital Nomads:
    The arrival of affluent foreigners—especially Americans working remotely—has intensified gentrification. Many U.S. citizens take advantage of Mexico’s 180-day visa-free stay, cycling in and out to maintain residency. This has led to resentment among locals who feel displaced and unable to compete with foreign purchasing power.
  • Economic Displacement:
    Protesters argue that government policies favor those with higher incomes, resulting in forced or illegal evictions. Slogans like “Housing is a right, not a commodity” and “Mexico for Mexicans” were prominent during the marches.
  • Demands for Regulation:
    Demonstrators called for stricter migration controls and for foreign residents to contribute more to the local economy, including paying fair taxes and respecting local culture.

Escalation and Official Response

  • Vandalism and Confrontations:
    While the protest started peacefully, a subset of demonstrators vandalized businesses—particularly those catering to foreigners—and harassed tourists. Chants of “gringo go home” and “pay taxes, learn Spanish, respect my culture” echoed through the streets as windows were smashed and property damaged.
  • Government Reaction:
    City officials condemned the violence and emphasized Mexico City’s tradition of openness and migration. At least 15 businesses and public facilities reported damage. Authorities called for dialogue and unity, while also acknowledging the real pressures of rising rents and displacement.

Broader Context and Global Parallels

  • International Pattern:
    The protests in Mexico City mirror movements in cities like Barcelona and Madrid, where locals have also rallied against mass tourism and the transformation of neighborhoods by short-term rentals and foreign investment.
  • Political Response:
    President Claudia Sheinbaum and other leaders have addressed the unrest, rejecting xenophobia but recognizing the legitimate concerns about housing affordability and community displacement.

Summary Table

IssueProtester ConcernsNotable Incidents
GentrificationSoaring rents, loss of affordable housingVandalism in Condesa, Roma
U.S. MigrationDisplacement by digital nomads, lack of regulationHarassment of tourists
Economic DisplacementForced evictions, government favoritismSlogans: “Housing is a right”
Official ResponseCalls for dialogue, condemnation of violence15+ businesses damaged

Conclusion

The recent protests in Mexico City reflect mounting anger over gentrification, housing insecurity, and the impact of foreign migration on local communities. As tensions rise, calls for policy reform and greater protections for residents are intensifying. City leaders face mounting pressure to balance openness with protecting the rights and livelihoods of long-term residents, signaling that the debate over Mexico’s urban future is far from over.

Continue Reading

Business

Pros and Cons of the Big Beautiful Bill

Published

on

The “Big Beautiful Bill” (officially the One Big Beautiful Bill Act) is a sweeping tax and spending package passed in July 2025. It makes permanent many Trump-era tax cuts, introduces new tax breaks for working Americans, and enacts deep cuts to federal safety-net programs. The bill also increases spending on border security and defense, while rolling back clean energy incentives and tightening requirements for social programs.

Pros

1. Tax Relief for Middle and Working-Class Families

2. Support for Small Businesses and Economic Growth

  • Makes the small business deduction permanent, supporting Main Street businesses.
  • Expands expensing for investment in short-lived assets and domestic R&D, which is considered pro-growth.

3. Increased Spending on Security and Infrastructure

4. Simplification and Fairness in the Tax Code

  • Expands the Earned Income Tax Credit (EITC) and raises marginal rates on individuals earning over $400,000.
  • Closes various deductions and loopholes, especially those benefiting private equity and multinational corporations.

Cons

1. Deep Cuts to Social Safety Net Programs

  • Cuts Medicaid by approximately $930 billion and imposes new work requirements, which could leave millions without health insurance.
  • Tightens eligibility and work requirements for SNAP (food assistance), potentially removing benefits from many low-income families.
  • Rolls back student loan forgiveness and repeals Biden-era subsidies.

2. Increases the Federal Deficit

  • The bill is projected to add $3.3–4 trillion to the federal deficit over 10 years.
  • Critics argue that the combination of tax cuts and increased spending is fiscally irresponsible.

3. Benefits Skewed Toward the Wealthy

  • The largest income gains go to affluent Americans, with top earners seeing significant after-tax increases.
  • Critics describe the bill as the largest upward transfer of wealth in recent U.S. history.

4. Rollback of Clean Energy and Climate Incentives

5. Potential Harm to Healthcare and Rural Hospitals

6. Public and Political Backlash

  • The bill is unpopular in public polls and is seen as a political risk for its supporters.
  • Critics warn it will widen the gap between rich and poor and reverse progress on alternative energy and healthcare.

Summary Table

ProsCons
Permanent middle-class tax cutsDeep Medicaid and SNAP cuts
No tax on tips/overtime for most workersMillions may lose health insurance
Doubled Child Tax CreditAdds $3.3–4T to deficit
Small business supportBenefits skewed to wealthy
Increased border/defense spendingClean energy incentives eliminated
Simplifies some tax provisionsThreatens rural hospitals
Public backlash, political risk

In summary:
The Big Beautiful Bill delivers significant tax relief and new benefits for many working and middle-class Americans, but it does so at the cost of deep cuts to social programs, a higher federal deficit, and reduced support for clean energy and healthcare. The bill is highly polarizing, with supporters touting its pro-growth and pro-family provisions, while critics warn of increased inequality and harm to vulnerable populations.

Continue Reading

Business

Trump Threatens to ‘Take a Look’ at Deporting Elon Musk Amid Explosive Feud

Published

on

The escalating conflict between President Donald Trump and Elon Musk reached a new peak this week, as Trump publicly suggested he would consider deporting the billionaire entrepreneur in response to Musk’s fierce criticism of the president’s signature tax and spending bill.

FILE PHOTO: Tesla CEO Elon Musk arrives on the red carpet for the automobile awards “Das Goldene Lenkrad” (The golden steering wheel) given by a German newspaper in Berlin, Germany, November 12, 2019. REUTERS/Hannibal Hanschke/File Photo

“I don’t know, we’ll have to take a look,” Trump told reporters on Tuesday when asked directly if he would deport Musk, who was born in South Africa but has been a U.S. citizen since 2002.

This threat followed a late-night post on Trump’s Truth Social platform, where he accused Musk of being the largest recipient of government subsidies in U.S. history. Trump claimed that without these supports, Musk “would likely have to shut down operations and return to South Africa,” and that ending such subsidies would mean “no more rocket launches, satellites, or electric vehicle production, and our nation would save a FORTUNE”.

Trump also invoked the Department of Government Efficiency (DOGE)—a federal agency Musk previously led—as a potential tool to scrutinize Musk’s companies. “We might have to put DOGE on Elon. You know what DOGE is? The DOGE is the monster that might have to go back and eat Elon,” Trump remarked, further intensifying the feud.

Background to the Feud

The rupture comes after Musk’s repeated attacks on Trump’s so-called “Big, Beautiful Bill,” a comprehensive spending and tax reform proposal that Musk has labeled a “disgusting abomination” and a threat to the nation’s fiscal health. Musk, once a Trump ally who contributed heavily to his election campaign and served as a government advisor, has called for the formation of a new political party, claiming the bill exposes the need for an alternative to the current two-party system.

Advertisement

In response, Trump’s allies have amplified questions about Musk’s citizenship and immigration history, with some suggesting an investigation into his naturalization process. However, legal experts note that deporting a naturalized U.S. citizen like Musk would be extremely difficult. The only path would involve denaturalization—a rare and complex legal process requiring proof of intentional fraud during the citizenship application, a standard typically reserved for the most egregious cases.

Political Fallout

Musk’s criticism has rattled some Republican lawmakers, who fear the feud could undermine their party’s unity ahead of the 2026 midterm elections. Meanwhile, Musk has doubled down on his opposition, warning he will support primary challengers against Republicans who back Trump’s bill.

Key Points:

As the dispute continues, it has become a flashpoint in the broader debate over government spending, corporate subsidies, and political loyalty at the highest levels of American power.

Continue Reading

Trending