With Congress on recess, President Obama called for a bipartisan compromise on a deficit-reduction package that includes tax increases, specifically by closing loopholes for the wealthy and large corporations, including the end of oil and gas subsidies. Congressional leaders appointed members to the Joint Select Committee on Deficit Reduction (JSC) during the week of August 8, and the president said he plans to send recommendations to the group. The IRS, meanwhile, released guidance addressing how to elect carryover bases for estates of decedents dying in 2010, and proposed regulations detailing how low-income taxpayers can claim the health insurance premium tax credit.
President Obama said he intends to advance recommendations to the Joint Select Committee on Deficit Reduction “over the coming weeks,” noting that Standard & Poor’s (S&P’s) downgrading of the U.S. Triple AAA credit rating on August 5 should “give us a renewed sense of urgency” to solve the nation’s long-term debt problem (TAXDAY, 2011/09/09, W.1). He said the so-called “Super Committee” tasked with reaching agreement on at least $1.5 trillion in defense and nondefense discretionary spending cuts will have the administration’s full cooperation. As the bipartisan panel works to reach agreement on measures to address the long-term debt and deficit problems facing the U.S., the president maintained that there are several pieces of legislation that Congress could pass as soon as they return from recess to help “jump start the economy” and, at the same time, “get our fiscal house in order.” They include extension of the payroll tax cut for workers and unemployment benefits and tax credits for employers that hire veterans moving into the private workplace.
Obama also dismissed the suggestion that he call Congress back into session to resolve the debt and deficit problem. He said that “the last thing we need is Congress spending more time arguing in D.C.” Noting his plan to visit the Midwest the week of August 15, the president said members of both parties in Congress need to spend more time listening to their constituents’ frustration with legislative gridlock.
Twelve House and Senate lawmakers were named to the JCS. The Super Committee’s recommendations of spending cuts or tax increases to lower federal red ink are due by November 23. Then, Congress must approve the deficit proposals by December 23 or face automatic cuts in defense and entitlement programs, according to the Budget Control Act of 2011 (P.L. 112-27) (TAXDAY, 2011/08/03, W.1). House members named to the deficit panel include: Reps. James Clyburn, D-S.C., Xavier Becerra, D-Calif., Chris Van Hollen, D-Md., Dave Camp, R-Mich., Jeb Hensarling, R-Tex., and Fred Upton, R-Mich. Senate members include: Sens. Jon Kyl, R-Ariz., Pat Toomey, R-Pa., and Rob Portman, R-Ohio, Max Baucus, D-Mont., John Kerry, D-Mass., and Patty Murray, D-Wash.
A report by the Treasury Inspector General for Tax Administration (TIGTA) on taxpayer correspondence to the IRS regarding their cases found that IRS responses are generally accurate, but that the IRS fails to meet its 30-day deadline for responding (TAXDAY, 2011/08/11, T.2). Interim letters to taxpayers do not provide specific information and are not clear regarding what taxpayers need to do next, TIGTA reported.
TIGTA also reported that the IRS provides helpful and accurate tax law assistance, but taxpayers experience lengthy waiting times to speak to IRS representatives in person or on the telephone (TAXDAY, 2011/08/12, T.1). Visitors to Taxpayer Assistance Centers waited an average of one hour to receive assistance, and some were turned away without being allowed to schedule an appointment. .
Guidance. The IRS provided guidance on how to elect carryover basis for estates of decedents dying in 2010 (IR-2011-83, Notice 2011-66, Rev. Proc. 2011-41; TAXDAY, 2011/08/08, I.4). Estates can make the election on Form 8939 and will not pay any estate tax for 2010.
The IRS issued proposed regulations on how low-income taxpayers can claim the health insurance premium tax credit (TDNR TG-1274, NPRM REG-131491-10; TAXDAY, 2011/08/15, I.1). The credit is available to individuals who enroll in qualified health plans through Affordable Insurance Exchanges established under the Patient Protection and Affordable Care Act (P.L. 111-148).
Interim guidance on the taxation of annuity and life-insurance contracts that provide long-term care insurance (Notice 2011-68; TAXDAY, 2011/08/12, I.1) has been provided. The guidance discusses charges against the cash value of the annuity or insurance contract.
The IRS issued final regulations that revise the actuarial tables for valuing annuities, interests for life or a term of years, and remainder or reversionary interests in property (T.D. 9540; TAXDAY, 2011/08/10, I.4). The tables apply to interests valued on or after May 1, 2009, when the IRS issued temporary and proposed regulations.
The IRS has determined that the Remittance Basis Charge imposed by the United Kingdom qualifies for the U.S. foreign tax credit (Rev. Rul. 2011-19; TAXDAY, 2011/08/12, I.2). The Charge applies to U.K. nondomiciliaries over 18 who were U.K. residents in at least seven of the prior nine years.
OVDI. The IRS has reminded taxpayers that the 2011 Offshore Voluntary Disclosure Initiative for offshore accounts will expire August 31, 2011 (IR-2011-84; TAXDAY, 2011/08/09, I.1). Participants have to pay back taxes and interest for up to eight years plus a 25 percent penalty.
Disaster Relief. The IRS has suspended certain requirements for low-income housing credit projects, to provide emergency housing to people affected by flooding in Alabama (Notice 2011-65; TAXDAY, 2011/08/08, I.1). The IRS has also updated a disaster relief notice for parts of North Dakota (ND-2011-15; TAXDAY, 2011/08/08, I.5).
Preparers. The IRS has updated frequently asked questions (FAQs) posted on its website regarding tax return preparers (TAXDAY, 2011/08/08, I.3). The FAQs discuss supervised preparers and preparers of non-Form 1040 series returns.
By Stephen K. Cooper, Paula Cruickshank and Brant Goldwyn, CCH News Staff