News Briefings - DC Highlights

DC Highlights

11/16/2009 -- IRS is eager to find taxpayers entitled to undeliverable refund checks

IRS is in possession of almost 108,000 refund checks totaling $123.5 million that were returned to the agency by the U.S. Postal Service due to mailing address errors. (IR 2009-101) The undeliverable refund checks average $1,148 and some taxpayers are due more than one check. According to IRS, taxpayers can generally update their addresses by using the “Where's My Refund?” tool on the agency Web site. The tool will provide the status of their refund and in some cases may offer information on resolving delivery problems, IRS said. Taxpayers can access a telephone version of “Where's My Refund?” by calling (800) 829-1954.

11/16/2009 -- FY 2009 deficit makes huge jump as a share of gross domestic product

The record-setting federal deficit of $1.4 trillion in fiscal year 2009 rose as a share of the country's gross domestic product (GDP) from 3.1% in FY 2008 to 9.9% in FY 2009, the Congressional Budget Office (CBO) said on Nov. 6. (Monthly Budget Review) This was the highest deficit as a share of GDP since 1945, CBO said, adding that it “reflected a sharp drop in revenues and a substantial increase in spending.” Receipts in FY 2009 plummeted to $2,105 billion, a decrease of $419 billion (or 17%) from FY 2008. Total revenues declined from 17.5% of GDP in 2008 to 14.8% of GDP in 2009. Individual income tax receipts showed the largest decrease, going from 7.9% to 6.4% of GDP. Individual receipts also showed the largest decline in dollar terms-$230 billion (or 20%). Social insurance receipts declined by $9 billion (or 1%). Approximately $142 billion of that combined decline resulted from a 28% drop in nonwithheld receipts. The withholding of individual income and payroll taxes dropped by $117 billion (or 7%). Offsetting some of those declines was a reduction of $21 billion in refunds of individual income taxes. Net receipts from corporate income taxes recorded the largest decline in percentage terms, almost 55%, falling from $304 billion in 2008 to $138 billion in 2009. “That decline continues the pattern that began in the middle of 2007 and can be attributed to continued weakness in corporate profits, legislation enacted during the year (most notably provisions that allow for more rapid depreciation of assets), and the ability of firms to use current-year losses to reduce tax liabilities from previous years,” CBO said. This reversed a four-year trend that began in 2003 when corporate receipts accelerated sharply, rising by nearly 40% annually, on average. Corporate receipts are now almost down to the 2003 level, CBO noted. The initial outlook for FY 2010 is also gloomy. CBO estimated a deficit of $175 billion in October, about $19 billion more than the deficit recorded in the same month last year. Revenues were $29 billion (or 18%) lower than in October 2008. CBO said the decline “stemmed from reductions in withheld individual income and payroll taxes resulting from continued economic weakness and the revenue-reducing provisions of the American Recovery and Reinvestment Act of 2009.” The budget review is available at http://cbo.gov/ftpdocs/107xx/doc10708/11-9-09MBR.pdf.

11/16/2009 -- IRS must safeguard taxpayer information in requests for copies of tax returns and transcripts

Taxpayers who submit requests for copies of tax returns or transcripts are at risk of unauthorized disclosures of taxpayer information, the Treasury Inspector General for Tax Administration (TIGTA) said in an audit that was recently released. (Audit Report No. 2009-40-140) Disclosure problems can arise during the processing of taxpayer Requests for Copy of a Tax Return (Form 4506) or Requests for Copy of a Tax Return Transcript (Form 4506-T), the audit said. As described in the audit, taxpayers submit these forms for many reasons, including to verify income for child support or to obtain a loan to start a business or buy a home. A judgmental sample of 120 taxpayer requests for copies of individual tax returns and transcripts revealed that 51 requests (or 43%) were processed incorrectly or not in accordance with existing guidelines. Twenty-nine (or 24%) of the requests contained errors that increased the risk of unauthorized disclosures, TIGTA said. In addition, TIGTA auditors, using their personal information, submitted requests for 33 transcripts. Of these, five (or 15%) were incorrectly processed. “All five requests increased the risk of unauthorized disclosures of taxpayer information either because the Social Security Numbers were incorrect of the forms were not signed and dated,” TIGTA said. The audit can be found at http://treas.gov/tigta/auditreports/2009reports/200940140fr.pdf.

11/16/2009 -- Upcoming IRS webinar to focus on e-filing

IRS will be conducting a webinar—an interactive Web-based seminar—on Nov. 18 that will focus on the benefits of using electronic filing, the agency said on Nov. 10. (IR 2009-103) The webinar, “E-File: Building the Case, A Panel Discussion with Tax Professionals,” will air three times. Tax professionals must register by Nov. 17 for one of the hour-long sessions which are scheduled for 10 a.m., 1 p.m., and 4 p.m. EST. Participants in the program include IRS specialists and representatives of the American Institute of Certified Public Accountants, National Association of Enrolled Agents, and National Association of Tax Professionals. IRS plans to collect e-mailed questions from viewers and will post the consolidated questions and answers on its Web site. Certificates of Completion are available for Continuing Professional Education credit, IRS said. Additional information and a link to the Webinar registration site are available at http://www.irs.gov/newsroom/article/0,,id=215363,00.html.

11/16/2009 -- IRS names recipients of Volunteer Income Tax Assistance grants

IRS has awarded nearly $8 million in matching grants to support its Volunteer Income Tax Assistance (VITA) program, the agency announced on Nov. 10. (IR 2009-104) The grants were awarded to 147 out of the 360 organizations that sought funding. The new grantees are located in all 50 states and Washington, DC. VITA participants are organizations that provide free federal tax return preparation and electronic filing to low- and moderate-income individuals. A list of the grant recipients is located at http://www.irs.gov/pub/irs-utl/2010_vita_grants.pdf.

11/16/2009 -- IRS encounters problems in its oversight of the Health Coverage Tax Credit

IRS must improve certain processes to ensure individuals claiming the Health Coverage Tax Credit (HCTC) on their annual income tax return accurately compute the credit, the Treasury Inspector General for Tax Administration (TIGTA) said in a recent audit. (Audit Report No. 2009-40-137) The HCTC, a provision of the Trade Adjustment Assistance Reform Act of 2002, was designed to cover a substantial portion of health care costs for workers who lost their jobs due to foreign trade and who receive benefits through one of two trade-related programs as well as eligible recipients of pensions that are being paid by the Pension Benefit Guaranty Corporation (PBGC). In a system that involves both state and other federal agencies, IRS is responsible for ensuring individuals meet program eligibility requirements. In addition to receiving trade-related or PBGC benefits, eligibility requires that a recipient cannot receive Medicare, is not in prison, cannot be claimed as a dependent on someone's return, and has a qualified health plan. IRS received accolades from TIGTA for its advance monthly process that ensures individuals meet requirements prior to participation and that the credit is being accurately calculated. The breakdown in the system occurs when individuals claim the HCTC on their returns. “Claiming the HCTC via the filing of a tax return presents the highest risk for errors because the credit is being determined by the taxpayer as opposed to the IRS, which computes the amount for claimants participating in the advance monthly payment option,” TIGTA said. A statistically valid sample of 82 returns claiming the HCTC identified 59 (or 72%) that did not have the required documentation attached. In addition, IRS processes do not effectively identify and prevent individuals from erroneously claiming the credit. “Our review identified 1,260 individuals who appear to have erroneously claimed on their annual Tax Year 2007 tax returns about $1.8 million in HCTC advance monthly payments,” TIGTA said. The report is available at http://treas.gov/tigta/auditreports/2009reports/200940137fr.pdf.