Federal Tax Headlines

1975

Applicable Federal Rates for March 2012 Released (Rev. Rul. 2012-9)

Various prescribed rates for federal income tax purposes for March 2012 have been provided by the IRS. The annual short-term, mid-term, and long-term applicable federal interest rates (AFRs) are 0.19 percent, 1.08 percent and 2.65 percent, respectively. The semiannual short-term, mid-term, and long-term AFRs are 0.19 percent, 1.08 percent and 2.63 percent, respectively. Quarterly short-term, mid-term and long-term AFRs are 0.19 percent, 1.08 percent and 2.62 percent, respectively. Finally, the monthly short-term, mid-term and long-term rates are 0.19 percent, 1.08 percent and 2.62 percent, respectively.

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Head Cattle Buyer Not Responsible Person Liable for Unpaid Withholding Taxes (Tarpoff, DC Ill.)

The head cattle buyer of a slaughterhouse and packaging facility was not liable for the trust fund recovery penalty. The individual was not a responsible person because he did not have sufficient control of the company’s finances to allocate funds to pay other creditors in preference to paying the government. The individual was not an officer, member, manager, owner or shareholder and never attended a board of directors’ meeting. He did not have supervisory authority over accounting, finance or payroll and he did not determine who to pay or the priority of payments.

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Partners’ Motion to Reconsider Dismissal of Limitations and Penalty Claims Denied; Issues Decided in Partnership-Level Proceeding (Barry, FedCl)

Various partners’ motion for reconsideration of the dismissal for lack of jurisdiction of their challenge to flow-through tax assessments and tax shelter penalties was denied. The partners’ case was governed by the decision in R.C. Prati, FedCl, 2008-1 USTC ¶50,307, which dismissed the partners’ claims for lack of subject-matter jurisdiction because they had to be addressed in a partnership-level proceeding. However, on reconsideration of its original dismissal order, the Prati court permitted the partners’ to pursue any unresolved partner-specific claims.

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CCH Weekly Report from Washington, D.C.

Before leaving for a week-long Presidents’ Day recess, the House and Senate passed legislation to extend a payroll tax cut, unemployment benefits and Medicare payments to physicians through the end of 2012. Also during the week of February 13, the president signed the Federal Aviation Administration (FAA) Modernization and Reform Act of 2012 (P.L. 112-95) and sent his fiscal year 2013 budget plan to Congress. The IRS, meanwhile, issued guidance allowing certain estates of married individuals who died during the first six months of 2011 to have an extension of time to make the portability election.

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Congress Passes Extension of Payroll Tax Holiday; CCH Tax Briefing Now Available

The House on February 17 approved a 10-month extension of the payroll tax holiday by a vote of 293-to-132, followed by the Senate, which passed the measure by a 60-to-36 margin. The legislation now goes to President Obama for his signature. The Conference Report to accompany the Middle Class Tax Relief and Job Creation Act of 2012 (HR 3630), provides that the Social Security tax for employees would remain at a reduced rate of 4.2 percent through December 2012, with unemployment benefits continued, although scaled back in three stages, and the current Medicare reimbursements for physicians retained for another 10 months.

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IRS Releases Dirty Dozen Tax Scams for 2012 (IR-2012-23)

The Internal Revenue Service issued its annual “Dirty Dozen” list of tax scams, advising taxpayers to use caution to protect themselves from being victims in a variety of schemes ranging from identity theft to return preparer fraud. The schemes peak during the filing season and they can be used in-person, on-line and by e-mail to mislead individuals with promises of refunds and free money. The IRS Criminal Investigation Division and the Department of Justice work closely to identify the scams and prosecute the criminals who commit them.

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Agreement Reached on Payroll Tax Cut Extension

Negotiators struck a deal late on February 15 to extend a payroll tax cut, unemployment benefits and Medicare payments to physicians through the end of 2012. However, the timing of votes on the measure remains uncertain as tax writers continue work on the legislative text. With lawmakers preparing to leave town for a week-long Presidents’ Day recess, leaders of both parties remained unwillingly to commit to holding votes within the next two days.

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IRS Updates Ex Parte Communications Between Appeals and Other IRS Functions (IR-2012-22; Rev. Proc. 2012-18)

The IRS has provided an update to Rev. Proc. 2000-43, 2000-2 CB 404, which provides guidance regarding ex parte communications between Appeals and other Internal Revenue Service functions. The update was necessary due to changes to some of the IRS business practices and to its adoption of new practices since the existing rules were issued in October 2000. The new guidance implements a provision aimed at ensuing that the Office of Appeals remains an independent and flexible vehicle for settling audit and collection-related disputes, without litigation, between taxpayers and the IRS.

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