tax research topics 2021

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9 important tax topics for individuals and business owners in 2021

The COVID-19 pandemic and resulting economic uncertainty of 2020 left many business owners and individuals steering an unpredictable course; and though the instability is less, key questions remain in 2021. When considering issues of liquidity, workforce planning and individual tax planning, there are nine tax issues individuals and business owners should know.

Managing significant tax changes despite the uncertainty will ensure individuals and businesses are best positioned for success throughout the remainder of 2021 and beyond.

1. Paycheck Protection Program (PPP):  Launched in early 2020, with a second round of funding issued in December, PPP has been a key program for assisting many businesses in making ends meet during the pandemic. Upon enactment as a part of the CARES act, Congress made the income from this forgivable loan nontaxable, but the IRS originally considered qualifying expenses to be nondeductible. Congress corrected this issue in December, and taxpayers that received funding through this mechanism should now receive truly tax-free assistance at the federal level provided they qualify for forgiveness. At the state level, however, the treatment of PPP remains murky, with many states still without guidance and some still following the IRS’ pre-correction approach.

2. Employee Retention Credit (ERC):  The ERC provides a payroll tax credit for certain taxpayers subject to a government shutdown or experiencing a significant reduction in revenues. The credit is equal to up to $5,000 per eligible employee in 2020 and $7,000 per quarter for the first two quarters of 2021. The calculation is based upon wages and certain other benefits paid during the qualification period. Originally, this benefit was unavailable to companies that received PPP funding; however, this changed in December. Taxpayers cannot double dip paying for wages out of PPP funds and get the credit on those wages. At first glance, the qualification parameters may make you shy away from exploring this credit; however, with a little work you may qualify.

3. Net operating losses (NOL):  The passage of the Tax Cuts and Jobs act in 2017 did away with the ability to carryback NOLs to prior periods and limited losses from flow through businesses to individuals. These limitations have been temporarily lifted and taxpayers are allowed a five-year carryback of NOLs arising in tax years beginning after December 31, 2017 and before January 1, 2021. These temporary rules allow taxpayers the ability to carryback NOLs to years prior to rate reductions due to the Tax Cuts and Jobs Act, creating a permanent tax savings of up to 14 percent for corporations and approximately ten percent for individuals. With increases in tax rates expected in future years, taxpayers will have to weigh cash today versus potential greater future savings

4. Recovery Rebate Credit/Economic Impact Payments:  The US Treasury began issuing economic impact payments in April and December of 2020. The maximum first payment was $1,200 per individual taxpayer and $500 per qualifying child and the second payment was $600 per individual taxpayer or qualifying child. In order to qualify for payments you must be issued a Social Security Number, or be a married member of the armed forces with at least one Social Security Number. The first and second payments phase out at Adjusted Gross Income levels over $150,000 in the case of a joint return for 2018 and 2019, respectively. For information on qualification please see the following articles  CARES Act ,  Consolidated Appropriations Act of 2021 .

Economic Impact Payments were issued based upon Income levels in 2018 and 2019.  If you did not receive the full amount of these payments you may qualify for a Recovery Rebate Credit based upon your 2020 Adjusted Gross Income. This credit is claimed by filing your 2020 income tax return and including the calculated amount. Some taxpayers not ordinarily required to file a tax return may benefit because of this credit.

5. State tax footprint:  As a rule of thumb, a business is taxable in a state if it has employees working there. While some states have said that employees forced to work remotely because to the pandemic will not subject a company to state taxation, these types of relief provisions were the exception and not the norm, and have mostly come to an end. What this means is that, as the effects of the pandemic linger and employees continue to work outside the office or businesses move to a more permanent virtual employment dynamic, their footprint will expand as their employees settle in new remote locations. The impact of this expanded footprint may be felt across a wide spectrum of state and local level taxes, which may require substantially more attention from owners and management.

The unsuspecting business owner may think, “it is only one employee the exposure can’t be that great”, but state-specific sourcing rules may result in significant tax swings, particularly in relation to large transactions in circumstances where key employees, managers, and owners have moved away from the business’ historical headquarters. To protect your business it will be important to understand and assess the state and local tax risk of where your employees are waiting out the pandemic, or settling permanently if your business goes virtual. Additionally, it’s important to understand that key employees, managers, and owners may be more limited than other employees in their states of choice in the event of a permanent virtual transformation.

It isn’t all bad though. Employee movement may have net positive results. For example, historically single state businesses may be able to apportion income for the first time, and application of throwback and throwout rules may be reduced. Further, for those businesses that have decided to move permanently to a work from home environment, some states are starting to offer tax credits and incentives in relation to employees that decide to move within their boundaries as work from home employees. There may be an opportunity here to examine where you want your employees to reside, and give them options going forward.

6. Residency issues:  Anytime a business shifts to a remote environment, whether temporarily or permanently, employees and owners may end up with additional nonresident tax filings or even residency issues. For example, an employee who lived in their vacation home away from their state of residence for a few months during the pandemic may be required to pay tax to that state on wages earned while working there. If that employee’s time at that vacation home lingered on, they may find that they have run afoul of that state’s statutory residency rules, and may have to pay tax to two states as a resident of both. It is important to catch these issues early, as there are significant implications related to the employee’s credit for taxes paid to nonresident states and, potentially, the business’ tax withholding requirements. These types of complicated tax situations should not be taken lightly.

General individual planning

7. Charitable contributions:  Individuals who itemize in 2020 and 2021 may elect to deduct qualified charitable contributions (QCCs) of up to 100% of AGI with any excess being carried over for 5 years, deductible up to 60% of AGI. The QCC definition does not include cash contributions to most donor advised funds, a supporting organization or a private non-operating foundation. Taxpayers should be aware of situations where it is more advantageous to carry forward their QCCs and utilize other deductions on Schedule A.

In 2020, individuals who do not itemize can receive an ‘above-the-line’ deduction for QCCs up to $300. This deduction has been extended into 2021 with an increase for joint filers up to $600.

Corporations making cash contributions for 2020 and 2021 have an increased limitation to 25% from 10%.

8. Roth conversion:  With the amount the government is spending trying to stabilize the economy, historically low tax rates, and messaging from the current administration there is a belief that tax rates will increase sometime in the near future.  With this in mind, many taxpayers are considering converting their traditional IRA into a Roth IRA. This can also create a powerful estate planning tool without requiring the contributing individual to take distributions during their life. This increases the amount of time tax free appreciation can occur.

Another consideration many are making is do you convert an IRA to a Roth IRA and also offsetting the income effect with QCCs up to 100 percent of 2020 or 2021 AGI.

9. Estate planning:  The Biden administration has messaged that they are reviewing options for changing the transfer tax system in the United States.  Three major changes being considered are:

• Decreasing the current $11.7 Million exemption to historic levels (without any action by congress this will happen by law on Decece ber 31 2025)
• Increases in transfer tax rates from the current 40 percent rate
• Elimination of the step up in basis for transfers at death

Other considerations include potential changes to discounting rules and term limits on Grantor Retained Annuity Trusts. These considerations are causing many taxpayers to consider utilizing their $11.7 Million exemption today or update estate planning to ensure they can minimize the effects of potential changes.   It is important to take your time and plan these things out. Ensure that you aren’t doing something today that you will regret five years from now.

There is no telling what the next session of Congress will produce. If you are concerned about possible changes to the tax laws and the impact this may have on you, your family, or your business, now is a great time to meet with your advisors, attorneys, and CPAs to discuss the ever-changing environment.

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Final regs. issued for clean energy credit transfers

The IRS issued final regulations regarding the election to transfer certain clean energy tax credits. The regulations include specific rules for partnerships and S corporations as eligible taxpayers and transferee taxpayers.

Draft of Form 1099-DA for reporting digital asset transactions released

The draft form, which when finalized will be used by brokers to report digital asset transactions, reflects the language of the proposed regulations, including a broad definition of “broker.”

IRS has mixed results from ‘ghost employer’ enforcement efforts

The IRS had mixed success in its first efforts to find employers who evade taxes, doing better in its criminal pursuit than on the civil side, the Treasury Inspector General for Tax Administration said in a recent report.

Updated FAQs provide details on phase-in timing of BOI access

The FAQs from Treasury’s Financial Crimes Enforcement Network said access to beneficial ownership information will be phased in, beginning this spring with a pilot program for some federal agency users and concluding in spring 2025, when financial institutions with customer due-diligence requirements will be able to review BOI.

Despite moratorium, IRS gets 20,000 ERC claims weekly, Werfel says

IRS commissioner Danny Werfel told the Senate Finance Committee that a tax bill passed by the House in January would help the IRS combat fraud in employee retention credit claims.

IRS grants limited waiver for underpayment of estimated corporate AMT

In light of the continuing challenges taxpayers are facing with the corporate alternative minimum tax, the IRS granted a waiver of the addition to tax for failure to pay estimated corporate AMT “in the interest of sound tax administration.”

Dirty Dozen list ends with easements, digital assets, and more

The IRS winds up its annual list of 12 scams and schemes by covering two broad categories: bogus tax-avoidance strategies and schemes with an international element.

Proposed regs. issued for 1% excise tax on corporate stock repurchases

Two sets of proposed regulations issued by the IRS provide guidance on the implementation of the new excise tax and on rules for the procedure and administration applicable to the reporting and payment of the tax.

Two home energy rebates not includible in gross income, IRS says

The IRS said it will not include the rebates provided under the Inflation Reduction Act of 2022 in individual purchasers’ gross income or in the cost basis of the property purchased.

AICPA: BOI ruling confuses businesses; enforcement should be delayed

In a letter to the Treasury secretary and the FinCEN director, the AICPA called for enforcement of beneficial ownership information reporting regulations to be suspended until after lawsuits are settled.

Supreme Court to decide estate tax impact of life insurance in closely held businesses

This term, the Supreme Court will answer the questions regarding the estate tax treatment of life insurance proceeds received by a closely held business and its shareholder redemption obligations. It heard oral arguments last week.

Foreign earned income and housing exclusion denied

Another worker at a U.S.–Australia joint defense facility fails to nullify a closing agreement waiver.

Court’s inaccessibility extends taxpayers’ petition filing deadline

Although mailed after the 90- day deadline had expired, the petition was timely because it was filed within a 14-day extension provided under Sec. 7451(b)(1).

Tax Court petition is ruled untimely

When a private delivery service is used, it must be one the IRS has specifically identified to satisfy Sec. 7502, the Tax Court holds.

Simpler IRS notices are coming ... Reporting of digital assets as cash delayed until IRS issues regs. ... IRS enforcement efforts collect $520 million from wealthy taxpayers ... Taxpayer advocate: IRS again fails tax pros with PPS call answer rate ... IRS collects record-setting $4.9 trillion in tax revenue in FY 2022 ... ERC voluntary Disclosure program requiring 80% claim payback launched

Dirty Dozen list from IRS opens with phishing, smishing scams

The IRS opened its annual Dirty Dozen list with scams that trick recipients into clicking a suspicious link, filling out personal and financial information, or downloading malware onto their computer.

Latest federal budget includes $20 billion rescission for IRS

The appropriations act enacted over the weekend that kept the federal government from shutting down included $12.3 billion for the IRS, but also codified an agreed-upon $20 billion cut in money allocated by the Inflation Reduction Act.

Enforcement, voluntary programs yield over $1 billion from ERC claims

On the deadline for businesses to offer to repay erroneous employee retention credit claims under the voluntary disclosure program (VDP), the IRS said assessments account for $572 million of the revenue, with the VDP and the claim withdrawal process accounting for the rest.

Taxpayer notice of third-party contact shortened under proposed regs.

The IRS would reduce the notice of third-party contact with respect to the determination or collection of the taxpayer’s tax liability to 10 days from 45 days in several circumstances involving statutory periods for assessments and collections that expire in one year or less.

Werfel says digital initiatives can transform ‘iconically unpopular’ IRS

Allowing taxpayers to communicate with the IRS almost entirely online will free the agency’s workers to handle other tasks, Commissioner Danny Werfel said in a speech Monday.

Where to find April’s flipbook issue

The Journal of Accountancy is now completely digital. 

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2021 Tax Brackets

On a yearly basis the IRS adjusts more than 40 tax A tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. provisions for inflation Inflation is when the general price of goods and services increases across the economy, reducing the purchasing power of a currency and the value of certain assets. The same paycheck covers less goods, services, and bills. It is sometimes referred to as a “ hidden tax ,” as it leaves taxpayers less well-off due to higher costs and “bracket creep,” while increasing the government’s spending power. . This is done to prevent what is called “ bracket creep Bracket creep occurs when inflation pushes taxpayers into higher income tax brackets or reduces the value of credits , deductions , and exemptions . Bracket creep results in an increase in income taxes without an increase in real income. Many tax provisions—both at the federal and state level—are adjusted for inflation. ,” when people are pushed into higher income tax bracket A tax bracket is the range of incomes taxed at given rates, which typically differ depending on filing status. In a progressive individual or corporate income tax system, rates rise as income increases. There are seven federal individual income tax brackets; the federal corporate income tax system is flat . s or have reduced value from credits and deductions due to inflation, instead of any increase in real income.

The IRS used to use the Consumer Price Index (CPI) as a measure of inflation prior to 2018. [1] However, with the Tax Cuts and Jobs Act of 2017 , the IRS now uses the Chained Consumer Price Index (C-CPI) to adjust income thresholds, deduction amounts, and credit values accordingly. [2]

These inflation adjustments are for tax year 2021, for which taxpayers will file tax returns in early 2022. Note that the Tax Foundation is a 501(c)(3) educational nonprofit and cannot answer specific questions about your tax situation or assist in the tax filing process.

2021 Federal Income Tax Brackets and Rates

In 2021, the income limits for all tax brackets and all filers will be adjusted for inflation and will be as follows (Tables 1). The top marginal income tax rate of 37 percent will hit taxpayers with taxable income Taxable income is the amount of income subject to tax , after deductions and exemptions . For both individuals and corporations, taxable income differs from—and is less than—gross income. of $523,600 and higher for single filers and $628,300 and higher for married couples filing jointly.

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Standard Deduction The standard deduction reduces a taxpayer’s taxable income by a set amount determined by the government. It was nearly doubled for all classes of filers by the 2017 Tax Cuts and Jobs Act ( TCJA ) as an incentive for taxpayers not to itemize deductions when filing their federal income taxes . and Personal Exemption

The standard deduction for single filers will increase by $150 and by $300 for married couples filing jointly (Table 2).

The personal exemption for 2021 remains eliminated.

Alternative Minimum Tax (AMT)

The Alternative Minimum Tax (AMT) was created in the 1960s to prevent high-income taxpayers from avoiding the individual income tax An individual income tax (or personal income tax) is levied on the wages, salaries, investments, or other forms of income an individual or household earns. The U.S. imposes a progressive income tax where rates increase with income. The Federal Income Tax was established in 1913 with the ratification of the 16th Amendment . Though barely 100 years old, individual income taxes are the largest source of tax revenue in the U.S. . This parallel tax income system requires high-income taxpayers to calculate their tax bill twice: once under the ordinary income tax system and again under the AMT. The taxpayer then needs to pay the higher of the two.

The AMT uses an alternative definition of taxable income called Alternative Minimum Taxable Income (AMTI). To prevent low- and middle-income taxpayers from being subject to the AMT, taxpayers are allowed to exempt a significant amount of their income from AMTI. However, this exemption phases out for high-income taxpayers. The AMT is levied at two rates: 26 percent and 28 percent.

The AMT exemption amount for 2021 is $73,600 for singles and $114,600 for married couples filing jointly (Table 3).

In 2021, the 28 percent AMT rate applies to excess AMTI of $199,900 for all taxpayers ($99,950 for married couples filing separate returns).

AMT exemptions phase out at 25 cents per dollar earned once taxpayer AMTI hits a certain threshold. In 2021, the exemption will start phasing out at $523,600 in AMTI for single filers and $1,047,200 for married taxpayers filing jointly (Table 4).

Earned Income Tax Credit A tax credit is a provision that reduces a taxpayer’s final tax bill, dollar-for-dollar. A tax credit differs from deductions and exemptions, which reduce taxable income, rather than the taxpayer’s tax bill directly. (EITC)

The maximum Earned Income Tax Credit (EITC) in 2021 for single and joint filers is $1502, if the filer has no qualifying children (Table 5). The maximum credit is $3,618 for one child, $5,980 for two children, and $6,728 for three or more children. The credit for filers without qualifying children was significantly expanded for tax year 2021 in the American Rescue Plan Act (ARPA) enacted in March 2021.

Child Tax Credit

The American Rescue Plan Act (ARPA) enacted in March 2021 significantly expanded the Child Tax Credit in several ways. The expansion expires after 2021. The Child Tax Credit (CTC) is $3,000 for children 6 and older and $3,600 for children under 6. Half the credit will be advanced to families monthly, at $250/month for older children and $300/month for younger children, while the other half will be received on tax returns. It is fully available and refundable to households with no income, unlike the Child Tax Credit’s former design . The changes only apply to tax year 2021.

Capital Gains Tax A capital gains tax is levied on the profit made from selling an asset and is often in addition to corporate income taxes, frequently resulting in double taxation. These taxes create a bias against saving, leading to a lower level of national income by encouraging present consumption over investment. Rates (Long-Term Capital Gains)

Long-term capital gains are taxed using different brackets and rates than ordinary income.

Qualified Business Income Deduction (Sec. 199A)

The Tax Cuts and Jobs Act includes a 20 percent deduction for pass-through business A pass-through business is a sole proprietorship, partnership, or S corporation that is not subject to the corporate income tax ; instead, this business reports its income on the individual income tax returns of the owners and is taxed at individual income tax rates. es against up to $164,900 of qualified business income for unmarried taxpayers and $329,800 for married taxpayers (Table 7).

Annual Exclusion for Gifts

In 2021, the first $15,000 of gifts to any person are excluded from tax. The exclusion is increased to $159,000 for gifts to spouses who are not citizens of the United States .

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[1] Internal Revenue Service, “Revenue Procedure 2020-45,” https://www.irs.gov/pub/irs-drop/rp-20-45.pdf .

[2] Robert Cage, John Greenlees, and Patrick Jackman, “Introducing the Chained Consumer Price Index,” U.S. Bureau of Labor Statistics, May 2003, https://www.bls.gov/cpi/additional-resources/chained-cpi-introduction.pdf .

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The Tax Policy and Controversy Outlook in 2021

By Kate Barton and Barbara Angus

If record books were kept for tax policy, there would be an asterisk next to 2020.

As the world grappled with the humanitarian and economic crisis created by the Covid-19 pandemic, longer-term policy objectives were largely put on hold by governments. The outlook for 2021 is less dramatic, although tax policy and tax enforcement may still be far from normal. Undoubtedly, the year 2021 will be defined by transformation, particularly as governments and businesses continue to reimagine their operations for the next normal.

Throughout the many waves of the pandemic, tax policy played a pivotal role in supporting economies. When the pandemic first hit, governments took rapid action, delivering record levels of support and financial stimulus and suspending some audit and litigation activity. At the same time, limitations around mobility saw the adoption of new digital ways of working, a trend likely to continue and provide additional avenues for global coordination and cooperation in both tax policymaking and tax administration.

As the pandemic runs its course, jurisdictions will certainly need every tool available to them as they attempt to balance the significant and competing priorities confronting them in 2021. Governments are still faced with addressing continued relief needs, while also protecting their economies from further harm by taking action to spur recovery, whether through new or enhanced tax incentives. Jurisdictions also will need to begin to turn their attention to paying for pandemic-related expenditures. How governments will contend with deficits, some of historic size, and put their fiscal houses in order are still works in progress, though heightened tax enforcement may well play a significant role.

These observations are supported by data gathered in the annual EY Tax Policy and Controversy Outlook survey, which was completed at the end of 2020 by EY tax professionals in 68 jurisdictions. Below we share some of the highlights from this data.

Global tax trends

While 2021 is expected to be another unpredictable year with the management of the Covid-19 pandemic continuing to be a large variable, there are some notable trends emerging as jurisdictions across the globe contend with broadly similar challenges.

Covid-19 pandemic responses

By the end of 2020, governments issued roughly US$30 trillion in financial stimulus in more than 140 jurisdictions around the world. The monumental level of support and stimulus enacted by policymakers comes at a significant cost, and exactly how governments plan to offset these expenditures is still uncertain.

For the Outlook , EY tax professionals were asked to forecast their jurisdiction’s primary response to these costs, with the opportunity to select multiple areas. Only slightly more than a tenth of the respondents indicated that they expect higher taxes in their jurisdiction in any particular category during 2021, including corporate income, indirect (including VAT) or individual income, reflecting the expectation of a collective reticence on the part of governments to raise taxes right now.

Tax administration developments

Many tax authorities embraced new technologies after the first wave of the Covid-19 pandemic shuttered their offices. Tax authorities adopted new platforms in order to keep working and 70% of responders to the Outlook expect continued digital advances in their jurisdiction’s tax administration in 2021. Updated technological platforms are expected to affect many areas of compliance ranging from simple registration to cash registers being automatically linked to tax authority databases.

Heightened focus on taxing the digital economy

Taxation of the digital economy has been a focus of policymakers for several years. The current project to address this challenge, commonly called Base Erosion and Profit Shifting (BEPS) 2.0, is complicated both technically and politically. The Pillar One proposals for new nexus and profit allocation rules and Pillar Two proposals for global minimum tax rules would fundamentally alter the long-standing international tax architecture. Implementation and application of new rules of the type contemplated would require an unprecedented level of multilateral cooperation.

Despite the complexity of the BEPS 2.0 project and the logistical challenges created by the Covid-19 pandemic, the Inclusive Framework in October 2020 released detailed blueprints on the two pillars with a goal of achieving consensus by mid-2021. There are significant policy differences that would have to be resolved to reach consensus and move forward to implementation of the proposed rules. There also are other avenues for potential multilateral agreement, including ongoing discussions in the UN Tax Committee and ongoing work at the EU level. Moreover, without agreement on a coordinated approach, jurisdictions likely would take act on their own, including consideration of digital services taxes.

Minimal changes to tax bases and rates in effect for 2021

The global trend toward lower corporate income tax rates and broader bases continued, but with less dramatic effect than in recent years and with limited change to the overall corporate income tax responsibility. To date, no jurisdictions have raised their corporate tax rates in effect for 2021, and five jurisdictions have lowered their rates.

Increased incentives also play a part in corporate income tax in many jurisdictions. A quarter of Outlook respondents expect expanded research and development (R&D) incentives in their jurisdiction in 2021. Additionally, a quarter of respondents expect expanded incentives for business investment. Respondents in eight jurisdictions expect expansions in both these areas.

“We are also seeing an increase in incentives related to reductions in greenhouse gas emissions and other activities aimed at reducing carbon footprints,” says Cathy Koch, EY Global Sustainability Tax Leader and EY Global Tax Policy Network Leader. “Globally, governments are working to address climate-related risks and tax is a critical component of that effort.” Sustainability behaviors are also being influenced through VATs, with many jurisdictions putting in place new taxes on particular items.

In 2020, many governments provided VAT exemptions for items needed to battle the Covid-19 pandemic. However, targeted changes like those we saw in 2020 do not have a significant revenue effect when compared with the general levying of VAT on mainstream goods or services. Outlook respondents are expecting limited VAT changes in 2021, with more than 80% expecting the VAT level in their jurisdiction to stay the same. None of the respondents reported an increase in the top VAT rate in their jurisdiction in effect for 2021, although Oman did introduce a new 5% VAT, effective beginning in April 2021.

Individual income tax rates in effect for 2021 have risen in five jurisdictions and have decreased in two. Expectations regarding changes in the individual income tax bases also are fairly limited. Three-quarters of respondents expect the overall level of individual income tax in their jurisdiction to remain the same in 2021.

Enhanced enforcement efforts anticipated

While many governments are still considering what tax policy changes to make, “We are already seeing some governments shift their focus to raising revenue,” says Luis Coronado, EY Global Tax Controversy Leader and EY Global Transfer Pricing Leader. However, governments must balance protecting their economies – and inbound investment – with their need for revenue, making raising taxes a challenging proposition. Fully collecting all that is due from existing revenue sources may be seen by tax authorities as the path of least resistance.

Governments now are resuming collection and enforcement actions that were paused in 2020, including tax audit and litigation activity. Transfer pricing has historically been identified as a top tax audit issue and 2021 is no exception. More than 80% of respondents to the Outlook listed transfer pricing as one of their government’s top audit issues. Multinational companies are expected to be a core focus of most tax authorities, with more than 70% of respondents anticipating increased tax audit pressure on such companies in 2021. Additionally, Covid-19 pandemic stimulus measures, mobile worker risk, the treatment of losses and the issuance of tax refunds are all forecast to drive new tax audit activity in 2021.

Regional trends

While there are notable commonalties on a global basis, some tax policy trends are more pronounced when viewed through a regional lens.

Implementation work continues in EMEIA

“The biggest tax focus in EMEIA, other than the Covid-19 crisis, is the implementation of the EU’s Mandatory Disclosure Regime (MDR) that requires the reporting of certain cross-border arrangements,” says Jean-Pierre Lieb, EY EMEIA Tax Policy and Controversy Leader. “There was a flurry of activity in 2020 as governments and businesses prepared to put the MDR into action.”

As MDR implementation currently takes center stage in the EU, the legislative aspects of the original BEPS project and the related EU Anti-Tax Avoidance Directive (ATAD) have now been largely completed in most jurisdictions. However, some of the jurisdictions that joined the Inclusive Framework more recently still have some BEPS implementation work to complete.

Measures, such as those developed in the BEPS project, may gain greater focus elsewhere as Middle East jurisdictions begin to rebalance their tax systems and connect more globally on tax policy. Hit hard by the decline in oil and gas revenue as a result of the Covid-19 crisis, some Middle Eastern jurisdictions are seeking to diversify their revenue streams.

“Enforcement of current revenue streams will be a top concern throughout the EMEIA region as governments begin to tackle their budgetary pressures from the record stimulus packages and support measures,” says Bridget Walsh, EY EMEIA Tax Managing Partner. “At the same time, we are increasingly seeing tax rise up the agenda of boards with C-Suite executives taking much more interest and having greater oversight in tax issues, particularly managing tax risks and resulting disputes.”

Growth is the goal in Asia-Pacific

“Governments in the Asia-Pacific region are more concerned with stimulating the economy and ensuring long-term competitiveness than with immediate revenue raising measures in the wake of the Covid-19 crisis,” says Siew Moon Sim, EY Asia-Pacific Tax Policy and Controversy Services Leader. Indeed, the region leads the world in new and expanded business incentives according to the Outlook , with more than half of Asia-Pacific jurisdictions expected to offer more beneficial R&D incentives, and more than a third expected to expand other incentives in 2021. “It seems the plan for bringing in revenue in 2021 is to grow the tax base by attracting business rather than increasing the current level of tax,” says Eng Ping Yeo, EY Asia-Pacific Tax Leader. “This is consistent with the cautions offered by OECD economists regarding the potential growth-dampening effects of tax increases at this time. We can expect governments to be monitoring the results of these policies closely.”

The entire Asia-Pacific region has only two rate increases in effect for 2021 to date, both involving individual income tax (New Zealand and South Korea). A significant decrease in the corporate income tax rate in the Philippines, from 30% to 25%, is scheduled to take effect retroactively to 1 July 2020 when enacted.

Dynamic tax landscape in the Americas

The environment is more varied for taxpayers in the Americas, where respondents forecast higher levels of change in 2021 than in other geographies. A third of respondents to the Outlook in the Americas anticipate significant tax reform in their jurisdiction in 2021, compared with only 13% in EMEIA and 20% in Asia-Pacific. While some current reform efforts are carry-over projects, many reflect new initiatives in jurisdictions that are contemplating joining the OECD, or that are otherwise taking a new look at modifying their tax systems.

Tax policy changes in the Americas are developing against the backdrop of a strong enforcement environment. These efforts may create uncertainty for taxpayers, with nearly 80% of respondents to the Outlook in the Americas reporting an expectation that their country’s tax authority could adopt new interpretations of existing tax laws as they seek tax revenues in 2021.

“With an increasing focus on government spending related to pandemic heightened economic challenges, governments are considering a wide array of responses—from tax rate changes, to tax base broadeners, to new taxes, to increased enforcement,” said Marna Ricker, EY Americas Vice Chair of Tax. “Because we also expect some governments to increase incentives for investments as well, it’s essential for tax leaders to have a holistic view of their specific fact patterns and the potential tax changes to properly evaluate the risks and the opportunities.”

Looking forward

Businesses will need to be resilient and agile as they anticipate and navigate the coming economic and tax developments. They must adapt their strategies and responses as the situation demands, especially with policymakers in governments around the world trying to balance the continued need for support and stimulus with concern about growing budget imbalances. This requires monitoring the tax policy and tax administration developments in all the jurisdictions that are relevant to the company’s business footprint. For tax departments, being able to anticipate potential changes in the tax environment and clearly communicating to stakeholders the implications of those changes for the business is more important than ever.

The views reflected in this article are the views of the authors and do not necessarily reflect the views of the global EY organization or its member firms.

For all media inquiries, please contact: [email protected]

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• CAMPUS TO CLIENTS

Practice and policy insights from academic tax research

• Practice Management & Professional Standards
• IRS Practice & Procedure

Editor: Annette Nellen, Esq., CPA, CGMA

In the continued spirit of bridging the gap between tax academics and tax practitioners, for the third year in a row, this column features examples of published academic tax research (see Meade, “ Campus to Clients: Academic Research for Your Practice Consideration ,” 52  The Tax Adviser  526 (August 2021), and Meade, “ Campus to Clients: Practitioners Can Benefit From Academic Tax Research ,” 51  The Tax Adviser  532 (August 2020)). The papers were selected by the External Relations Committee of the American Taxation Association (ATA) with the aim of sharing research that is relevant and of interest to practitioners. The ATA is the leading organization of tax academics, and the External Relations Committee aims to connect with tax professionals.

The five articles selected for this column highlight the wide breadth of topics and methodologies found in academic tax literature. Topics within academic tax literature that may be of interest to practitioners include tax policy, corporate and individual taxpayer behavior, effects of tax on stakeholders, tax accounting issues, and tax data analysis. Researchers provide valuable guidance on tax policy by providing insight on potential policy changes as well as feedback on existing policy.

Many academic tax papers examine corporate behavior using publicly available data such as annual reports, stock prices, rankings, and other sources of information. Studies of individual taxpayers are also common, with researchers conducting experiments or developing creative uses of public data. Federal, state, and international tax issues are often examined, as well as the impact of nontax developments on tax policy and behavior.

As with most academic research, these five articles were subject to a rigorous development and review process as outlined in the earlier columns. Researchers generally get input from peers on their “working paper” by presenting their thesis, approach, and initial findings at campus forums and conferences such as those sponsored by the American Accounting Association (AAA). Most articles undergo thorough blind peer review. Reviewers often call for some revisions, such as for clarification or deeper analysis, for the paper to be accepted for publication. The academic publishing world is often harsh, as many papers are rejected under these rigorous standards for research approach, content, novelty, and timeliness.

Of the articles summarized here, one was in a tax-specific journal, while the others come from broader accounting journals, including one focused on accounting history.

‘The Effects of Income Tax Timing on Retirement Investment Decisions’

Withdrawals from a tax-deferred (i.e., traditional) individual retirement account (IRA) or 401(k) are taxable, making the account’s after-tax value less than the nominal value appearing on a quarterly or annual account statement. This future tax liability’s salience is weak for most individuals, which may cause them to overestimate their after-tax retirement savings. Roth IRA accounts are not affected in this way because withdrawals from them generally are tax-free.

In their article published in the March 2021 issue of  The Accounting Review  (Vol. 96, Issue 2), Shane Stinson, Marcus Doxey, and Timothy Rupert hypothesize that individuals’ inclination to overestimate a tax-deferred account’s after-tax value may cause them to believe that it will be easier to meet their future cash flow needs than is the case. Such an individual therefore may see less of a need to generate a higher return than does an individual holding a Roth account with the same after-tax value, so investments held in tax-deferred accounts may be lower-risk, and thus lower-return, than investments held in Roth accounts.

The authors conducted an experiment to test this hypothesis. Participants allocated an account’s balance between two investments, where one of them had lower risk and a lower expected return than the other. Some participants had a tax-deferred account, while others had a Roth account. The two types of accounts had similar after-tax values. After controlling for participants’ risk preferences, the authors found that, compared with Roth account holders, tax-deferred account holders had higher estimates of their future after-tax balances, allocated more of their account to the lower-risk, lower-return investment, and perceived less difficulty in meeting their after-tax goal for retirement savings. These results are consistent with the authors’ hypothesis.

Additional parts of the experiment tested whether various interventions mitigate individuals’ inclination to take on less risk with a tax-deferred account. The authors found that tax-deferred account holders allocated more of their savings to higher-risk, higher-return investments when their retirement savings goal was stated in pretax dollars, when they had to estimate their final tax liability, and when they were given feedback about their progress toward saving for retirement. The authors also found that the effect was stronger when multiple interventions were applied simultaneously. Tax advisers and financial planning professionals are well positioned to provide such interventions, and the results of the authors’ experiment suggest that the interventions will have beneficial effects.

‘The Possible Weakening of Financial Accounting From Tax Reforms’

The objective of financial accounting is to provide information about a firm’s economic performance to shareholders and other external stakeholders. The objective of the federal income tax is to raise revenue and to provide various economic incentives to taxpayers. Because these objectives differ, a firm’s book income, which is determined under financial accounting rules, sometimes is greater than its taxable income, which is determined under tax law. This outcome can seem inappropriate to many taxpayers. Several proposals have been made in recent years to more closely link taxable income to book income, and the recently enacted Inflation Reduction Act of 2022, P.L. 117-169, includes a 15% minimum tax for large corporations that is based on adjusted financial statement income.

In her Presidential Scholar address to the AAA, which was published in the September 2021 issue of  The Accounting Review  (Vol. 96, Issue 5), Michelle Hanlon discusses several issues that are pertinent to such proposals. She notes that there could be full linkage, where book income is used as taxable income. There instead could be partial linkage, such as the business untaxed reported profits (BURP) adjustment that applied in the latter 1980s. Hanlon notes that the implementation of partial or full linkage is more complicated than many people realize because of such issues as net operating losses and controlled foreign corporations.

Hanlon reviews research on the financial reporting effects of linking book income and taxable income, such as during the BURP adjustment’s brief life and international differences in book-tax linkages. The evidence generally indicates that firms are more likely to alter their financial reporting to attain tax objectives when book-tax linkages are stronger, and this leads to a book income that is less informative for capital market participants. While these research results are not surprising to accountants, they seem to be underappreciated by the economists and lawyers who advise policymakers. Hanlon notes that there is not much research on these financial reporting effects and advocates for more of it.

Hanlon concludes that linking taxable income more closely to book income would be unwise because it likely would impair the quality of financial reporting. The capital market costs of such impaired quality are not easy to discern but are nonetheless real. In addition, increased book-tax linkages could tempt Congress to play a stronger role in financial reporting standard setting because of the tax effects. Whether or not one agrees with Hanlon’s conclusions, her discussion of the pertinent issues does an excellent job of better educating the reader about them.

‘Transparency and Tax Evasion: Evidence From the Foreign Account Tax Compliance Act (FATCA)’

The Foreign Account Tax Compliance Act (FATCA) was enacted in 2010 (as part of the Hiring Incentives to Restore Employment Act, P.L. 111-147) to limit U.S. individuals’ ability to evade U.S. tax through the use of offshore accounts. The act requires automatic information transfers to the IRS about foreign account and cross-border payments by foreign financial institutions (FFIs). Prior to FATCA, FFIs were subject to self-reporting requirements under the qualified intermediary program established in 2001. The IRS estimated that $458 billion of annual offshore income was unreported in the years leading up to the passage of FATCA (IRS, “ The Tax Gap — Tax Gap Estimates for Tax Years 2008–2010 ”).

In their 2020 article in  The Journal of Accounting Research  (Vol. 58, Issue 1), Lisa DeSimone, Rebecca Lester, and Kevin Markle examine how U.S. individuals responded to the passage of FATCA. The shift from self-reporting under the prior rules to automatic third-party reporting increased the perceived and actual risk of detection, which should reduce the level of tax evasion. However, the costs of evasion could remain below the tax savings from the use of offshore accounts, resulting in continued evasion through such accounts.

The actual amount of hidden offshore assets held by U.S. investors is unobservable. To measure the effects of FATCA, the study uses “round-tripping” behavior, in which assets hidden in foreign accounts are invested back in the United States. Specifically, foreign portfolio investment by individual investors into the United States from tax havens, relative to other countries, measures the inbound investment part of the “round trip.” The amount of inbound equity investment to the United States from tax havens declined by $7.8 billion to $15.3 billion in the years following FATCA, consistent with U.S. investors’ moving financial assets out of tax havens following the rule change.

To avoid FATCA, U.S. citizens may renounce their citizenship. The authors observed a large increase in expatriations following FATCA. Investments in alternative investments that are not subject to FATCA appear to have increased following FATCA, specifically, European collective investment vehicles, real estate, and art. Taken together, these results show U.S. individuals’ behavior regarding investment location and allocation decisions changed in response to FATCA.

The study highlights an intended consequence of FATCA, specifically, the reduction of the use of offshore accounts in tax havens to avoid U.S. tax. While this is considered progress, the use of offshore accounts for tax evasion remains. As with many tax rules, unintended consequences have also been observed, in that U.S. citizens avoid the FATCA requirements in a variety of ways, including renouncing their citizenship and investing in assets not subject to FATCA. These are important considerations for policymakers moving forward with third-party reporting regimes.

‘SALTy Citizens: Which State and Local Taxes Contribute to State-to-State Migration?’

Although there are many reasons for people to relocate across state lines, it is an open question whether, how much, and which type of taxes affect individuals’ decisions on which state to reside in. In their 2021 article in  The Journal of the American Taxation Association  (Vol. 43, Issue 1), Amy M. Hageman, Sean W.G. Robb, and Jason M. Schwebke study the impact of taxes on location decisions by specifically investigating which state and local taxes are most associated with state-to-state movement of individuals.

Several studies have considered the relationship between taxes and state migration, with mixed results and limited sample composition. For example, one study (Young and Varner, “Millionaire Migration and State Taxation of Top Incomes: Evidence From a Natural Experiment,” 64  National Tax Journal  255 (2011)) found little evidence that taxes have any effect on the change in migration patterns for millionaires within New Jersey. However, another study (Cebula, “Migration and the Tiebout-Tullock Hypothesis Revisited,” 68  American Journal of Economics and Sociology  541 (2009)) concludes that people tend to be attracted to lower state income and property tax burdens.

The authors examine the tax-effect question by hypothesizing that there will be a greater decrease in population in states that have a higher overall burden of death/gift, sales, and property taxes. They test their hypotheses by using regression models that separately compare the net migration at the state level against each of the tax burdens. They find that states with higher taxes tend to be associated with greater out-migration. They also find, when combining all the tax burdens into one model, that property and some types of sales (selective sales) taxes are the most significant. When examining the economic impact on migration from these two taxes, they find that a one-standard-deviation increase in net migration is associated with a $12.99 and $126.73 per capita decrease in selective and property taxes, respectively, collected.

State and local policymakers would find this paper of interest as they consider the degree and type of taxation levied on residents. It is important to have the revenues to fund services and projects but at the same time recognize that an increase in taxes is associated with a decrease in overall tax participants. This paper provides some quantitative analysis that can help determine the right mix of taxes and services. Further, businesses can use this information when they consider where to locate operations to best attract talent and employees.

‘Six Decades of US Tax Reform: Why Has the Average Couple’s Tax Burden Increased?’

The IRS and many other federal and state offices and agencies collect a lot of data, typically reported as raw data, such as how many returns are filed by individuals within various income ranges. What is not always seen is a lot of analysis of this data in ways that provide insights into historical trends and possible improvements to the laws to which the data relates.

In a 2021 article published in the  Accounting Historians Journal  (Vol. 48, No. 2), James M. Plečnik and Shan Wang report on their findings from research and tax calculations performed for 1955 through 2018. The researchers reviewed the tax laws applicable to a hypothetical median-income married couple with no dependents and income beyond eligibility for the earned income tax credit. This research involved finding the standard deduction, personal exemption, married-filing-jointly tax rate structure, and any special temporary relief provided to individuals, all for over 60 years. They also researched payroll tax information for the years under review. U.S. Census Bureau data was used to determine the median income for the couple, which ranged from $4,421 in 1955 to $80,663 in 2018.

With this income and payroll tax information (for both employee and employer, after tax), the researchers measured for all years the effective income tax rate (EITR) and the effective tax rate (ETR). The ETR includes both income and payroll taxes borne by the median-income couple. The authors found that the EITRs have decreased but ETRs have increased. They also observe that federal tax collections relative to GDP have been mostly constant over the past decades. They conclude that with payroll taxes included in the ETR analysis, there is a higher overall tax burden for the middle-class demographic studied.

The findings are a good reminder that employees bear federal taxes beyond what is reported on their Form 1040,  U.S. Individual Income Tax Return , and how a distorted picture results for taxpayers and policymakers when the somewhat hidden payroll taxes are omitted from reports on tax incidence and ETRs. The article also includes interesting lists of the major individual tax changes enacted during each presidency from that of Dwight Eisenhower to Donald Trump’s.

Practice relevance

The five articles summarized here are a small portion of the tax research produced by tax faculty annually. When practitioners visit campuses or otherwise interact with faculty, we encourage them to ask faculty about their research. Academics will benefit from additional insights into how that research relates to practice, and we believe practitioners will gain insights that can help in their planning and advocacy work.

Contributors

David Hulse,  Ph.D., is an emeritus professor at the University of Kentucky in Lexington, Ky.;  Kerry Inger,  CPA, Ph.D., is an associate professor at Auburn University in Auburn, Ala.;  Annette Nellen,  Esq., CPA, CGMA, is a professor in the Department of Accounting and Finance at San José State University in San José, Calif., and is a past chair of the AICPA Tax Executive Committee; and  Mitchell Oler,  CPA, Ph.D., is a department chair and associate professor at the University of Wyoming in Laramie, Wyo. For more information about this column, contact  [email protected] .

Recent developments in Sec. 355 spinoffs

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Tax season is confusing enough. Don’t fall for these false claims | Fact check roundup

Millions of Americans are filing their taxes ahead of the April 15 deadline. Consequences for not doing so include financial penalties or even jail time. 

The complexity of the filing process and various government financial initiatives has made the topic a popular source of misinformation.

The USA TODAY Fact-Check Team has debunked an array of such claims, including that Americans aren’t legally required to file taxes and that they can expect more IRS stimulus checks.

More: When is Tax Day 2024? Deadlines for filing tax returns, extensions and what you need to know

More : How to file your taxes for free in 2024

The claim: New stimulus checks available in March 2024

Our rating: False

A Treasury Department spokesperson told USA TODAY that no new round of stimulus checks has been approved. The article pictured in the post is digitally fabricated. Read more

More from the Fact-Check Team:  How we pick and research claims |  Email newsletter  |  Facebook page

The claim: There are no laws requiring American citizens to pay income taxes

The 16th Amendment gives Congress the power to collect federal income taxes. The power to enforce these tax laws has been delegated to the IRS, which imposes financial penalties on those who don't properly file their taxes. Read more

The claim: Post implies Biden plan would give all Americans $400 cash every month for two years

Our rating: Missing Context

The implied claim is wrong. Biden has not advocated for direct payments of that amount or frequency to any subset of Americans. The post is vague, but if it's intending to reference a proposed tax credit for first-time homebuyers that Biden introduced during the State of the Union address, it mischaracterizes that program. Read more

The claim: Trump proposed a 10% 'across-the-board' tax increase if re-elected

Trump proposed placing a 10% tariff on imported goods in a 2023 interview, not an "across-the-board" tax. Read more

The claim: Image shows an IRS memo stating that all tax collections since 1913 were illegal

There is no evidence such a memo existed. The IRS has no record of it, and the text of the memo contains factual errors about the lawsuit it references. Read more

The claim: Residents in certain states will receive a fourth stimulus check on Nov. 30

The IRS said the Treasury Department did not issue a fourth round of stimulus checks in late 2023. Some states named in the post are sending rebates to eligible taxpayers, but those are not stimulus checks and don't match the figures listed in the post. Read more

The claim: 18 million 'illegals' are exempt from taxes, housing costs, vaccine requirements, unlike US citizens

Experts say immigrants who lack permanent legal status pay rent, mortgages and many taxes just like citizens do. They also are subject to the same vaccine rules that govern citizens because those requirements are set by workplaces and schools and have nothing to do with immigration status, experts say. Read more

The claim: Trump’s tax cuts for the wealthy are responsible for a quarter of the national debt

Estimates vary on exactly how much Trump's 2017 tax bill added to the national debt, but none place its impact at 25% of the total figure. Experts told USA TODAY more than a quarter of the national debt was added during the Trump administration, but most of it was due to COVID-19 relief funding and not tax legislation. Read more

The claim: The IRS is hiring 87,000 'soldiers' to prosecute citizens and raising taxes on those who make $30,000 or more

 The 87,000 figure has been routinely misused online and was an estimate from a 2021 report by the Treasury Department; the IRS hasn't yet finalized a plan. A majority of the hires will not be special agents and thus will not be carrying weapons. The legislation does not raise individual tax rates for anyone, according to a Treasury Department spokesperson. Read more

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IRS releases 2023 Data Book describing agency’s transformation through statistics

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IR-2024-115, April 18, 2024

WASHINGTON — The Internal Revenue Service today issued its annual Data Book detailing the agency’s activities during fiscal year 2023 (Oct. 1, 2022 – Sept. 30, 2023), including revenue collected and tax returns processed.

For FY 2023, the IRS collected approximately $4.7 trillion, or about 96 percent of the funding that supports the federal government’s operations — to fund everything from education to national defense.

During FY 2023, the IRS processed more than 271.4 million tax returns and other forms, including more than 163.1 million individual income tax returns.

Beyond statistics, the 2023 Data Book reflects the initial impacts of the historic long-term funding provided under the Inflation Reduction Act (IRA) of 2022 to transform the IRS and modernize how the agency serves the American people.

“This once-in-a-generation funding opportunity provided by the IRA is an investment in the transformation of the IRS and an investment in the financial future of our nation,” IRS Commissioner Danny Werfel wrote in the Data Book introduction. “The effects of this IRA funding — to hire more IRS employees and modernize the agency’s technology and systems to provide better service to the American people — started showing up in the 2023 tax season. And that progress has accelerated into 2024.”

In FY 2023, with new phone assistors hired through IRA funding, IRS employees answered nearly 27.3 million phone calls — a 25% increase from FY 2022. The IRS opened or reopened more than 50 taxpayer assistance centers in FY 2023 that were closed during the pandemic. The IRS had more than 1.6 million contacts at 363 centers across the nation in FY 2023 to provide more in-person help to taxpayers – up 18% from FY 2022.

These increases in taxpayer assistance – on the phones, in person and on IRS.gov – are continuing in 2024,   as highlighted earlier this week   . The IRA funding is already making a difference for taxpayers, Werfel said — from shorter wait times for IRS telephone help, to more in-person and online resources for taxpayers, to the IRS’s free Direct File pilot tax filing program launched for 2024 in 12 states.

And the IRS has increased its enforcement and collections efforts on high wealth non-filers and those who underreport their tax liability through complex schemes. In FY 2023, there was no increase in audits of tax returns for taxpayers making under $400,000 per year.

After several challenging pandemic years, the IRS had a successful filing season in 2023, with the addition of 5,800 new employees hired to provide taxpayer service. Overall, the IRS’s workforce grew 5% in FY 2023.

Data highlights

The IRS issued $659 million in refunds to taxpayers during FY 2023 — a 2.7% increase over FY 2022.

In FY 2023, the IRS closed 582,944 tax return audits, resulting in $31.9 billion in recommended additional tax.

For all returns filed for tax years 2013 through 2021, the IRS examined 0.44% of individual returns filed and 0.74% of corporation returns filed, through the end of FY 2023.

The IRS has examined the returns of 8.7% of taxpayers filing individual returns reporting total positive income of $10 million or more for tax years 2013 through 2021, as of the end of FY 2023.

The IRS website had more than 880.9 million visits in FY 2023, including more than 303.1 million inquiries on its Where’s My Refund? online tool that enables taxpayers to check the status of their tax refund.

Some new features in the 2023 Data Book include two new tables from IRS’s Large Business & International Division focused on tax certainty programs. The Advance Pricing Agreement and Compliance Assurance Programs provide businesses the opportunity to work with the IRS to ensure tax compliance prior to filing, which benefits both businesses and the government.

The 2023 Data Book also features added information on telephone level of service with automation called LOS(A), and a trust score based on Performance.gov metrics.

To learn more details, view the complete 2023 Data Book online.

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Striking findings from 2023

Pew Research Center has gathered data around some of this year’s defining news stories, from the rise of artificial intelligence to the debate over affirmative action in college admissions . Here’s a look back at 2023 through some of our most striking research findings.

These findings only scratch the surface of the Center’s research from this past year .

A record-high share of 40-year-olds in the U.S. have never been married, according to a Center analysis of the most recent U.S. Census Bureau data . As of 2021, a quarter of 40-year-olds had never been married – up from 6% in 1980.

In 2021, the demographic groups most likely not to have ever been married by age 40 include men, Black Americans and those without a four-year college degree.

A Center survey conducted in April found that relatively few Americans see marriage as essential for people to live a fulfilling life compared with factors like job satisfaction and friendship. While majorities say that having a job or career they enjoy (71%) and having close friends (61%) are extremely or very important for living a fulfilling life, far fewer say this about having children (26%) or being married (23%). Larger shares, in fact, say having children (42%) or being married (44%) are not too or not at all important.

About half of Americans say the increased use of artificial intelligence in daily life makes them feel more concerned than excited – up 14 percentage points from last year, according to an August survey . Overall, 52% of Americans say they feel this way, an increase from 38% in December 2022.

Just 10% of adults say they are more excited than concerned about the increased use of AI, while 36% say they feel an equal mix of these emotions.

The rise in concern about AI has taken place alongside growing public awareness of the technology. Nine-in-ten adults say they have heard either a lot (33%) or a little (56%) about artificial intelligence. The share of those who have heard  a lot  is up 7 points since December 2022.

For the first time in over 30 years of public opinion polling, Americans’ views of the U.S. Supreme Court are more negative than positive, a July survey found . A narrow majority (54%) have an unfavorable view of the high court, while fewer than half (44%) express a favorable one.

The court’s favorable rating has declined 26 percentage points since 2020, following a series of high-profile rulings on issues including affirmative action in college admissions, LGBTQ+ rights and student loans. The drop in favorability is primarily due to a decline among Democrats and Democratic-leaning independents, just 24% of whom express a favorable opinion of the court.

A growing share of U.S. adults say the federal government should take steps to restrict false information online, even if it limits freedom of information, a June survey found . The share of U.S. adults with this view has risen from 39% in 2018 to 55% in 2023.

In the most recent survey, 42% of adults took the opposite view, saying the government should protect freedom of information, even if it means false information can be published.

Still, Americans remain more likely to say that tech companies – rather than the U.S. government – should be responsible for restricting false information online. About two-thirds (65%) said this in June.

The number of U.S. children and teens killed by gunfire rose 50% in just two years, according to a 2023 analysis of data from the Centers for Disease Control and Prevention (CDC). In 2019, there were 1,732 gun deaths among U.S. children and teens under 18. By 2021, that figure had increased to 2,590.

The gun death  rate  among children and teens – a measure that adjusts for changes in the nation’s population – rose 46% during that span.

Both the number and rate of children and teens killed by gunfire in 2021 were the highest since at least 1999, the earliest year for which this information is available in the CDC’s mortality database.

Most Asian Americans view their ancestral homelands favorably – but not Chinese Americans, according to a multilingual, nationally representative survey of Asian American adults .

Only about four-in-ten Chinese Americans (41%) have a favorable opinion of China, while 35% have an unfavorable one. Another 22% say they have a neither favorable nor unfavorable view. This stands in contrast to how other Asian Americans view their ancestral homelands. For instance, about nine-in-ten Taiwanese and Japanese Americans have a very or somewhat favorable opinion of their place of origin, as do large majorities of Korean, Indian and Filipino Americans.

While Chinese Americans’ views of China are more mixed, they still have a more favorable opinion of the country than other Asian adults do. Just 14% of other Asian Americans view China favorably.

Even before the Israel-Hamas war, Israelis had grown more skeptical of a two-state solution. In a survey conducted in March and April , prior to the war, just 35% of Israelis thought “a way can be found for Israel and an independent Palestinian state to coexist peacefully.” This share had declined by 9 percentage points since 2017 and 15 points since 2013.

Among both Arabs and Jews living in Israel, there have been declines over the past decade in the share of people who believe that a peaceful coexistence between Israel and an independent Palestinian state is possible.

A majority of Americans say they would tip 15% or less for an average restaurant dining experience, including 2% who wouldn’t leave a tip at all, an August survey shows . The survey presented respondents with a hypothetical scenario in which they went to a sit-down restaurant and had average – but not exceptional – food and service. About six-in-ten (57%) say they would leave a tip of 15% or less in this situation. Another 12% say they would leave a tip of 18%, and a quarter of people say they’d tip 20% or more.

Adults in lower-income households and those ages 65 and older are more likely than their counterparts to say they would tip 15% or less in a situation like this.

Partisan views of Twitter – the social media platform now called X – have shifted over the last two years, with Republican users’ views of the site growing more positive and those of Democratic users becoming more negative, according to a March survey . The share of Republican and GOP-leaning users who said the site is mostly bad for American democracy fell from 60% in 2021 to 21% earlier this year. At the same time, the share of Republican users who said the site is mostly good for democracy rose from 17% to 43% during the same span.

Democrats’ views moved in the opposite direction during that time frame. The percentage of Democratic and Democratic-leaning Twitter users who said the platform is good for American democracy decreased from 47% to 24%, while the share who said it is bad for democracy increased – though more modestly – from 28% to 35%.

These changes in views follow Elon Musk’s takeover of the platform in fall 2022.

Nearly half of U.S. workers who get paid time off don’t take all the time off their employer offers, according to a February survey of employed Americans . Among those who say their employer offers paid time off for vacation, doctors’ appointments or to deal with minor illnesses, 46% say they take less time off than they are allowed. A similar share (48%) say they typically take all the time off they are offered.

Among those who don’t take all their paid time off, the most common reasons cited are not feeling the need to take more time off (52% say this), worrying they might fall behind at work (49%), and feeling badly about their co-workers taking on additional work (43%).

Smaller shares cite other concerns, including the feeling that taking more time off might hurt their chances for job advancement (19%) or that they might risk losing their job (16%). Some 12% say their manager or supervisor discourages them from taking time off.

An overwhelming majority of Americans (79%) express a negative sentiment when asked to describe politics in the United States these days, a July survey found . Just 2% offer a positive word or phrase, while 10% say something neutral.

Among those who volunteered an answer, 8% use the word “ divisive” or variations of it, while 2% cite the related term “polarized.” “Corrupt” is the second-most frequent answer, given by 6% of respondents.

The top 15 most cited words also include “messy,” “chaos,” “broken” and “dysfunctional.” Many respondents are even more negative in their views: “terrible,” “disgusting,” “disgrace” and the phrase “dumpster fire” are each offered by at least 1% of respondents.

Around half of Americans (53%) say they have ever been visited by a dead family member in a dream or in another form, according to a spring survey . Overall, 46% of Americans report that they’ve been visited by a dead family member in a dream, while 31% report having been visited by dead relatives in some other form.

Women are more likely than men to report these experiences.

While the survey asked whether people have had interactions with dead relatives, it did not ask for explanations. So, we don’t know whether people view these experiences as mysterious or supernatural, whether they see them as having natural or scientific causes, or some of both.

For example, the survey did not ask what respondents meant when they said they had been visited in a dream by a dead relative. Some might have meant that relatives were trying to send them messages or information from beyond the grave. Others might have had something more commonplace in mind, such as dreaming about a favorite memory of a family member.

More Americans disapprove than approve of selective colleges and universities taking race and ethnicity into account when making admissions decisions, according to another spring survey , fielded before the Supreme Court ruled on the practice in June. Half of U.S. adults disapprove of colleges considering race and ethnicity to increase diversity at the schools, while a third approve and 16% are not sure.

Views differ widely by party, as well as by race and ethnicity. Around three-quarters of Republicans and Republican leaners (74%) disapprove of the practice, while 54% of Democrats and Democratic leaners approve of it.

Nearly half of Black Americans (47%) say they approve of colleges and universities considering race and ethnicity in admissions, while smaller shares of Hispanic (39%), Asian (37%) and White (29%) Americans say the same.

The share of Americans who say science has had a mostly positive effect on society has declined since 2019, before the coronavirus outbreak, a fall survey shows : 57% say science has had a mostly positive effect on society, down from 73% in 2019.

About a third of adults (34%) now say the impact of science on society has been equally positive and negative. And 8% say science has had a mostly negative impact on society.

Democrats have become much more likely than Republicans to say science has had a mostly positive impact on society (69% vs. 47%). This gap is the result of steeper declines in positive ratings among Republicans than among Democrats since 2019 (down 23 points and 8 points, respectively).

Nearly three-in-ten Americans express an unfavorable opinion of both major political parties – the highest share in at least three decades, according to a July survey . Overall, 28% of Americans have an unfavorable opinion of both the Republican and Democratic parties. This is more than quadruple the share in 1994, when just 6% of Americans viewed both parties negatively.

A majority of Americans say TikTok is a threat to national security, according to a survey conducted in May . About six-in-ten adults (59%) see the social media platform as a major or minor threat to national security in the United States. Just 17% say it is  not  a threat to national security and another 23% aren’t sure.

Views vary by partisanship and age. Seven-in-ten Republicans and GOP leaners say TikTok is at least a minor threat to national security, compared with 53% of Democrats and Democratic leaners. Conservative Republicans are more likely than moderate or liberal Republicans – or Democrats of any ideology – to say the view the app as a major threat.

Nearly half of those ages 65 and older (46%) see TikTok as a major threat to national security, compared with a much smaller share (13%) of adults ages 18 to 29.

Read the other posts in our striking findings series:

• Striking findings from 2022
• Striking findings from 2021
• 20 striking findings from 2020
• 19 striking findings from 2019
• 18 striking findings from 2018
• 17 striking findings from 2017
• 16 striking findings from 2016
• 15 striking findings from 2015
• 14 striking findings from 2014
• Affirmative Action
• Artificial Intelligence
• Asian Americans
• Business & Workplace
• Death & Dying
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• Family & Relationships
• Misinformation Online
• Other Topics
• Politics & Policy
• Social Media
• Supreme Court
• Trust in Science
• Twitter (X)
• Unmarried Adults
• War & International Conflict

Katherine Schaeffer is a research analyst at Pew Research Center

Private, selective colleges are most likely to use race, ethnicity as a factor in admissions decisions

Americans and affirmative action: how the public sees the consideration of race in college admissions, hiring, asian americans hold mixed views around affirmative action, more americans disapprove than approve of colleges considering race, ethnicity in admissions decisions, hispanic enrollment reaches new high at four-year colleges in the u.s., but affordability remains an obstacle, most popular.

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