Federal Reserve Chairman Ben Bernanke warned that the U.S. economic recovery could falter in 2013 unless the administration and lawmakers devise a solution to the so-called fiscal cliff. Bernanke urged lawmakers not to put off a decision until 2013, and agreed with Congressional Budget Office (CBO) warning that failing to find a solution would cause a recession. During the week of November 19, the IRS announced that it expects to issue final rules on the deduction and capitalization of expenditures related to costs to acquire, produce or improve tangible property in 2013. In addition, updated guidance on tax relief for victims of Hurricane Sandy was released.
In remarks before the New York Economic Club on November 20, Bernanke called the fiscal cliff one of the headwinds facing the nation’s economic recovery (TAXDAY, 2012/11/26, W.1 ). Another headwind, he said, is the need to increase the nation’s debt limit next spring. “Preventing a sudden and severe contraction in fiscal policy early next year will support the transition of the economy back to full employment; a stronger economy will, in turn, reduce the deficit and contribute to achieving long-term fiscal sustainability,” according to Bernanke.
Standard Mileage Rates. The IRS issued the 2013 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes (IR-2012-95 , Notice 2012-72 ; TAXDAY, 2012/11/26, I.1 ). The rate for business miles driven during 2013 increases 1 cent from the 2012 rate, to 56.5 cents.
Repair Regulations Postpone Application Date. The IRS has announced that it expects to issue final rules on the deduction and capitalization of expenditures related to costs to acquire, produce, or improve tangible property in 2013 (Notice 2012-73 ; TAXDAY, 2012/11/21, I.3 ). The IRS anticipates that the final regulations will apply to tax years beginning on or after January 1, 2014, and will permit taxpayers to apply the final regulations to tax years beginning on or after January 1, 2012.
Wellness Program Reward. The IRS, Department of Labor and Department of Health and Human Services issued proposed regulations relating to nondiscriminatory wellness programs in group health coverage (NPRM REG-122707-12 ; TAXDAY, 2012/11/21, I.4 ). The proposed regulations would increase the maximum permissible reward under a health-contingent wellness program offered in connection with a group health plan (and any related health insurance coverage) from 20 percent to 30 percent of the cost of coverage and would also increase the maximum permissible reward to 50 percent for wellness programs designed to prevent or reduce tobacco use.
December AFRs. The IRS has provided various prescribed rates for federal income tax purposes for December 2012 (Rev. Rul. 2012-31 ; TAXDAY, 2012/11/20, I.1 ).
IRS Urges AMT Patch. The IRS Oversight Board sent a letter to the leadership of the Senate Finance and House Ways and Means Committees urging action on the alternative minimum tax (AMT) “patch” and tax extenders (TAXDAY, 2012/11/20, I.2 ). Acting IRS Commissioner Steven T. Miller stated that there would be serious repercussions if the AMT patch is not enacted by the end of 2012.
Priority Guidance Plan. The IRS and the Treasury have released the 2012-2013 Priority Guidance Plan, which contains 317 projects that are priorities for allocation of the resources of IRS offices during the 12-month period from July 2012 through June 2013 (TAXDAY, 2012/11/20, I.4 ). The IRS and the Treasury have also released the fourth-quarter update to the 2011–2012 Priority Guidance Plan.
Hurricane Sandy Filing Relief. The IRS has provided updated tax relief to certain victims of Hurricane Sandy:
The IRS has postponed the filing date, until February 1, 2013, for some small tax-exempt organizations affected by Hurricane Sandy to take advantage of transitional relief when applying for reinstatement of their exempt status (Notice 2012-71 ; IR-2012-96 ; TAXDAY, 2012/11/26, I.2 ). If an eligible organization files its application for reinstatement of its tax-exempt status on or before February 1, 2013, it will be treated as if it had been timely filed on December 31, 2012.
The IRS announced in that it is extending until December 7 the diesel fuel penalty waiver for New Jersey and parts of New York that was scheduled to expire on November 20 (IR-2012-94 ; TAXDAY, 2012/11/21, I.5 ). As a result, the IRS will not impose a tax penalty under Code Sec. 6715 when dyed diesel fuel is sold or used on the highway.
Victims of Hurricane Sandy in the Rhode Island counties of Newport and Washington, which the president recently declared federal disaster areas, may qualify for tax relief from the IRS (RI-2012-30 ; TAXDAY, 2012/11/19, I.3 ). The IRS has postponed certain deadlines for taxpayers who reside or have a business in the disaster area.
The IRS has announced that it is providing relief to taxpayers who have been adversely affected by Hurricane Sandy and have retirement assets in qualified employer plans they would like to use to alleviate hardships caused by the hurricane (IR-2012-93 , Announcement 2012-44 ; TAXDAY, 2012/11/19, I.4 ). This relief is in addition to the relief already provided by the IRS pursuant to IR-2012-83 (TAXDAY, 2012/11/05, I.6 ).
By Stephen K. Cooper and Jessica J. Rodibaugh, CCH News Staff