The latest Congressional Budget Office (CBO) report released on August 22 indicates that the U.S economy will enter into a recession in 2013 unless Congress and the White House address the so-called fiscal cliff of expiring Bush-era tax cuts and lower defense and entitlement spending.
According to the CBO, the federal budget deficit will total $1.1 trillion for the 2012 fiscal year ending on September 30 and that unemployment will remain above 8 percent for the remainder of the year (TAXDAY, 2012/08/23, C.1 ). The CBO report said if the current law remains in place, including the planned spending cuts and the end of the 2001 and 2003 tax rates, then the deficit will shrink to roughly $641 billion in fiscal year 2013. However, such fiscal tightening will lead to a recession and a 9-percent unemployment rate in the second half of 2013. Under an alternative scenario in which the spending cuts and tax changes do not occur, the deficit will total $1 trillion and the economy will remain strong, the CBO said.
During the week of August 20, the Treasury Inspector General for Tax Administration (TIGTA) issued the following reports:
After reviewing several Freedom of Information Act (FOIA) cases, TIGTA found two cases where the IRS may have improperly withheld information from requestors (TAXDAY, 2012/08/24, T.1 ). However, the IRS had properly adhered to the legal requirements under Code Sec. 6103 in the sample cases reviewed, and the IRS remained relatively consistent in providing responses to requestors within the statutory time periods.
The IRS is protecting taxpayers’ rights when issuing systemically generated and manually prepared levies (TAXDAY, 2012/08/23, T.1 ). TIGTA reviewed 30 systemically generated levies and 59 manual levies issued by IRS employees and determined that systemic controls were effective to ensure the taxpayers were given notice of their appeal rights at least 30 calendar days prior to the issuance of the levies.
The audit for fiscal year 2012 of the IRS’s compliance with certain restrictions under the IR Restructuring and Reform Act of 1998 (RRA 98) (P.L. 105-206 ) on the use of records of tax enforcement results (ROTERs) found that the IRS achieved full compliance with all of the RRA 98 requirements (TAXDAY, 2012/08/21, T.1 ).
New FinCEN Director. Jennifer Shasky Calvery has been selected as the new director of the Financial Crimes Enforcement Network (FinCEN) (TAXDAY, 2012/08/21, T.2 ). Shasky Calvery, who is expected to begin her duties in September 2012, will replace the outgoing Director Jim Freis, who has served in the position since 2007.
Interest Rates. The IRS has announced that the interest rates for the calendar quarter beginning October 1, 2012, will remain at 3 percent for overpayments (2 percent in the case of a corporation), 3 percent for underpayments and 5 percent for large corporate underpayments (IR-2012-68 ; Rev. Rul. 2012-23 ; TAXDAY, 2012/08/24, I.1 ). The interest rate for the portion of a corporate overpayment exceeding $10,000 remains at 0.5 percent. The interest rates are computed by using the federal short-term rate based on daily compounding determined during July 2012.
Draft Form 706. The IRS released a draft of Form 706, U.S. Estate (and Generation-Skipping Transfer) Tax Return (Rev. August 2012) (TAXDAY, 2012/08/24, I.5 ). Significant changes reflected in the draft Form 706 include incorporating the portability provisions of Code Sec. 2010(c) and the addition of Schedule PC, Protective Claim for Refund.
PMTAs. The IRS has released nine program manager technical advice (PMTA) memoranda (PMTA 2012-011 through PMTA 2012-019; TAXDAY, 2012/08/22, I.3 , I.4 .) Topics include the cents column on Form 941, accuracy-related penalties for wrongly claimed frozen refundable credits, and the order in which the IRS must apply contemporaneous payments to a liability for purposes of calculating overpayment interest.
By Stephen K. Cooper and Jennifer J. Rodibaugh, CCH News Staff