News Briefings - DC Highlights
DC Highlights
3/12/2010 -- Drop in revenues pushes federal deficit higher than in FY 2009
The federal government ran a budget deficit of $655 billion in the first five months of fiscal year 2010, according to the latest Congressional Budget Office (CBO) estimate released on March 4. (Monthly Budget Review) This was $65 billion more than the deficit recorded during the same period last year. The difference was attributable to lower revenues in FY 2010 when compared to last year, CBO said. Receipts in February were some $16 billion (or 18%) higher than receipts in February 2009. According to CBO, this was the first monthly year-over-year increase in receipts since April 2008. "Gross corporate receipts in February were unusually high compared with receipts in the preceding months, suggesting that one-time factors unrelated to firms' current profitability contributed to that increase," CBO said. The bulk of the decline in FY 2010 receipts to date stemmed from a $54 billion (or 7%) drop in withheld receipts. This resulted primarily from lower wages and salaries and the Making Work Pay Credit, CBO said. Nonwithheld individual income and payroll taxes declined by $14 billion (or 15%), "primarily because payments of estimated taxes in January were relatively low," CBO added. Due to more refunds, net corporate income tax receipts were down $11 billion (or 20%) from the October-February period in FY 2009. "The increase in refunds stems in part from weak profitability as well as from recent legislation that extended the period over which corporations could apply current-year losses to offset income in previous years," CBO said. The budget review is available at http://www.cbo.gov/ftpdocs/112xx/doc11263/FebruaryMBR.pdf.
3/12/2010 -- CBO analyzes the Obama budget submission for FY 2011
If President Obama's fiscal year 2011 budget proposals were enacted, the federal government would run a deficit of $1.5 trillion in 2010 and $1.3 trillion in 2011, Douglas Elmendorf, CBO Director, wrote in a March 5 letter. (Letter to Sen. Daniel Inouye (D), Chairman, Senate Appropriations Committee) According to CBO, under the proposed budget, debt held by the public would grow from $7.5 trillion (or 53% of gross domestic product (GDP)) at the end of 2009 to $20.3 trillion (or 90% of GDP) at the end of 2020. Consequently, net interest would at least quadruple between 2010 and 2020 in nominal dollars and would grow from 1.4% of GDP in 2010 to 4.1% in 2020. As a result of various tax proposals included in the budget message, revenues would be $1.4 trillion (or 4%) below CBO's baseline projections from 2011 to 2020. CBO said this was "largely because" of the president's proposals to index the alternative minimum tax (AMT) for inflation starting at their 2009 levels and to extend various tax reductions enacted in the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) and the Jobs and Growth Tax Relief Reconciliation Act of 2003 (JGTRRA). CBO's baseline projections assume there is no change in current law, under which the parameters of the AMT revert to earlier levels and the reductions under both tax laws expire at the end of December 2010. President Obama's tax proposals regarding the AMT, EGTRRA and JGTRRA "would have, by far, the greatest budgetary impact," Elmendorf wrote. "Over the next 10 years, those policies would reduce revenues and boost outlays for refundable tax credits by a total of $3 trillion." The Elmendorf letter is located at http://www.cbo.gov/ftpdocs/112xx/doc11231/03-05-APB_Letter.shtml.
3/12/2010 -- Former IRS attorney is hit with a 4-year suspension
IRS on March 4 announced the suspension of a Massachusetts tax attorney for failing to file one federal tax return and for filing five other returns late. (IR 2010-27) According to IRS, the attorney, Kevin Kilduff, formerly worked for the IRS Office of Chief Counsel. He was barred from practicing before IRS for a minimum of 48 months. The IRS Office of Professional Responsibility (OPR) had alleged that Kilduff's conduct was "willful and disreputable," the IRS press release said. "OPR has sole discretion regarding his reinstatement to practice before the IRS," the agency said, adding that "at the very least, Kilduff must file all federal returns and pay all taxes he is responsible for, or enter an acceptable installment agreement or offer in compromise." Kilduff was originally handed a 24-month suspension by an administrative law judge but chose to appeal the decision to the Treasury Secretary's Appellate Authority which ultimately imposed the 48-month suspension. "Professionals who demonstrate a lack of respect for our tax system by failing to meet their own tax filing obligations should not expect to retain the privilege to practice before the IRS," said Karen Hawkins, Director of the OPR.
3/12/2010 -- IRS provides interim contact numbers for Austin tax professionals and taxpayers
IRS has posted on its Web site information on how Austin, TX, area tax professionals and taxpayers can reach the agency in the aftermath of the plane crash at one of its facility in the capital of the Lone Star State. Tax professionals with inquiries should contact the Austin IRS stakeholder liaisons at (512) 499-5529 or (512) 499-5715. Taxpayers with inquiries related to open cases at the Echelon 1 Building should call the following numbers for assistance-audit (examination) cases: (210) 841-2460; collection cases: (210) 841-2446 or 2447; and offers in compromise: (405) 297-4440. The taxpayer advocate office can be reached at (512) 499-5875. This information can be found at http://www.irs.gov/newsroom/article/0,,id=219873,00.html.
3/12/2010 -- IRS is stepping up its efforts to assist unemployed and financially strapped taxpayers
IRS is implementing a number of measures to aid people who are having problems meeting their tax obligations due to unemployment or other financial problems, the agency said on March 9. (IR 2010-29) These steps are "an expansion of efforts" that began a year ago and include the following: additional flexibility on offers in compromise, a series of "open houses" to be held on Saturdays, special joint IRS-partner group outreach to unemployed taxpayers, and the enhancement of a special section on the IRS Web site. According to IRS, agency employees will have "greater flexibility" and will be able to consider a taxpayer's current income and potential for future income when negotiating an offer in compromise. This marks a shift in the standard practice that takes into account a taxpayer's earnings in prior years. "The IRS may also require that a taxpayer entering into such an offer in compromise agree to pay more if the taxpayer's financial situation improves significantly," the agency said. The first of four open house events is scheduled for March 27. Dates, times and locations have yet to be announced. "Times are tough for many people and the IRS wants to do everything it can to help people who have lost their job or face financial strain," said IRS Commissioner Douglas Shulman.
3/12/2010 -- Statistics for 2008 show a decline in individual returns and an increase in AMT
The number of individual income tax returns for 2008 showed a slight decline from the number filed the previous year, according to statistics released by IRS. (Winter 2010 Statistics of Income Bulletin) Taxpayers filed 142.4 million individual returns in 2008 compared to the 143 million filed in 2007, a decline of 0.5%. According to IRS, for the first time since 2002, adjusted gross income (AGI) decreased from the previous year, dropping by 3.7% to $8.2 trillion in 2008. Key components that contributed to the decline in AGI were net capital gains, which decreased 40.4% from $749.1 billion in 2007 to $446.6 billion in 2008, and capital gain distributions (part of net capital gains), which decreased 74.6% to $22 billion. In addition, between 2007 and 2008, taxable income declined 5.1% to $5.6 trillion, total income tax fell by 6.2% to $1 trillion, and total tax liability decreased by 6% to approximately $1.1 trillion. "However, despite the decreases in income and other taxes, the alternative minimum tax rose 6.3% to $22.2 billion for 2008," the SOI said. The latest edition of the publication also includes articles on 2007 marginal income tax rates and 2007 sales of capital assets. The SOI is located at http://www.irs.gov/taxstats/article/0,,id=219330,00.html.
3/12/2010 -- CBO comments on proposed fee on major financial institutions
The Congressional Budget Office (CBO) on March 4 responded to a detailed inquiry regarding President Obama's proposal for a "Financial Crisis Responsibility Fee." (Letter from Douglas Elmendorf, CBO director, to Sen. Charles Grassley (R-IA), ranking member of the Senate Finance Committee) As described by CBO, the proposal would "assess an annual fee on liabilities of banks, thrifts, bank and thrift holding companies, brokers, and security dealers, as well as U.S. holding companies controlling such entities." The fee would apply to firms with consolidated assets in excess of $50 billion. It would be approximately 0.15% of a firm's total liabilities, excluding deposits subject to assessments by the Federal Deposit Insurance Corporation and certain liabilities related to insurance companies. The CBO letter addresses a number of questions posed by Grassley in a January 15 letter to both the CBO and the Joint Committee on Taxation. Among other things, the senator wanted to know who would ultimately pay the fee, its effect on the stability of financial institutions, and the fee's impact on the availability of credit in general and for small businesses. "A lot of analysts have said banks would pass the fee onto their customers," Grassley said in response to the CBO letter. "The CBO analysis confirms this and adds a lot of points for consideration from a very credible source," he added. The Grassley letter can be found at http://finance.senate.gov/press/Gpress/2010/prg030410d.pdf. The CBO response to Grassley is available at http://www.cbo.gov/ftpdocs/110xx/doc11046/03-04-Ltr_to_Grassley_on_FCRF.pdf.
