Trump signs $1.5 trillion tax cut bill in first major legislative win

President Donald Trump signed the Republican tax-overhaul bill to little fanfare on Friday, delivering a major tax cut to U.S. corporations along with a package of temporary cuts for other businesses and most individuals. “We are cutting taxes,” Trump told reporters in the Oval Office before signing the legislation. “We are taking care of people.” 

Trump’s signature caps a seven-week sprint that began when the House unveiled its tax bill last month, and it gives the GOP its first major legislative victory since January. 

The private setting was unusual given the significance of the legislation, but the process had been delayed until Congress passed a stopgap spending bill late Thursday. The legislation hasn’t scored well in national polls, in part because of concerns about its benefits for corporations and top earners. But Trump and other Republicans say average Americans will embrace it. 

The bill slashes the corporate tax rate to 21 percent from 35 percent and cuts individual tax rates across the board—though analyses have shown that most of the benefit would go to those at the top of the income scale. It also imposes new limits on deductions used heavily in high-tax states with high home values, meaning some people in those areas will see higher tax bills. 

Trump highlighted corporate responses to the new law. AT&T said Wednesday that it would give a special $1,000 bonus to 200,000 U.S. workers to celebrate the tax cut. 

Boeing Co. separately pledged $300 million for employee training, improved workplace infrastructure and corporate giving, crediting the new tax law. 

“This is having an even bigger impact faster than I thought,” Trump said Friday. 

Congress on Thursday night cleared the way for Trump’s signing by waiving automatic spending cuts that would have been triggered in January due to the $1.5 trillion revenue loss the bill would cause. 

The stopgap spending bill keeps the government open until Jan. 19, waiving cuts in all future years due to the tax bill under the 2010 PAYGO law. 

Overall, the bill is projected to decrease federal revenue by almost $1.5 trillion over the next decade—though its individual tax cuts are set to expire in 2026 in order to avoid adding to the deficit outside that window. 

Trump and GOP leaders have said they expect the business tax cuts to spur enough economic growth to make up for the revenue loss -- an assertion that many economists have questioned.

The legislation—and public perceptions of it—are expected to play a major role in 2018 elections that will determine whether Republicans retain control of Congress. 

Trump has repeatedly described the plan as a boon for the middle-class—and the bill includes provisions that almost double the standard deduction and expand the child tax credit. 

Those measures will benefit millions of families, not just those in the middle class. GOP leaders say a “typical family of four” that’s earning $73,000, the median family income in the U.S., would see a tax cut of more than $2,000 under the bill. But the bill also cuts the top marginal tax rate on households earning more than $600,000 a year, and provides a new tax break for owners of partnerships, limited liability companies and other so-called pass-through entities.

IRS prodded to use credit card payment data to do more tax audits

The Internal Revenue Service could be auditing more tax returns where it sees big discrepancies in the payments reported on the Form 1099-K and the income reported on tax returns, according to a new report.

The report, from the Treasury Inspector General for Tax Administration, pointed to legislation that Congress passed in 2008 requiring reporting of payment card transactions, such as from credit cards, debit cards and stored value cards. In response, the IRS developed Form 1099-K, Payment Card and Third Party Network Transactions, which payment settlement entities began submitting to the IRS in 2012. The law requires payers to report annual gross payment transactions to the IRS and send a written statement containing the same information to the participating payees that received the payments.

The IRS uses the Form 1099-K to help compare gross receipts from payment card sales to gross receipts reported on a taxpayer’s return. The requirement includes not only payments via credit cards, debit cards, and stored-value cards, but also through third-party networks such as PayPal.

TIGTA reviewed a sample of taxpayers with one Form 1099-K (although it noted some taxpayers have more than one) and found a total of 20,881 taxpayers with discrepancies of more than $10,000 between the income reported on their tax returns and their Form 1099-K amounts (and reporting less than 90 percent of the amount on the Form 1099-K). The tax accounts for these taxpayers showed no indication the IRS had audited them.

“Without contacting taxpayers through a notice or initiating an audit, the IRS cannot determine the reasons for discrepancies between amounts reported on Form 1099-K and income reported on tax returns,” said TIGTA Inspector General J. Russell George in a statement. “The IRS needs to take appropriate action at all times, and particularly when the discrepancy is large.”

TIGTA recommended the IRS consider implementing compliance projects to test the use of Form 1099-K data to identify certain types of tax returns for audit. The IRS should also identify and address the reasons why tax returns with large discrepancies between the income reported on tax returns and the amounts reported on Form 1099-K were not selected for audit or other treatment, TIGTA suggested. The IRS agreed with the recommendations in the report and intends to take action, but it also disagreed with TIGTA on the magnitude of the issue.

“With respect to TIGTA’s sample cases, we not only identified the same discrepancies, but for the vast majority of those cases also identified the reasons why we did not ultimately select cases for additional treatment, e.g. additional available information indicated that they would not be as productive as they otherwise appeared,” said Mary Beth Murphy, commissioner of the IRS’s Small Business/Self-Employed Division, in a statement. “Of the 20,881 discrepancy cases identified by TIGTA, we identified the reason why 18,053 were not selected for audit or other treatment.”