File Under: No Thanks I’ll Take The Cash
IRS reminds filers about savings bond option
The IRS is reminding those who haven’t filed their tax returns that they can receive their refunds in the form of savings bonds, payments to retirement accounts, mutual funds, as well as in the form of cash directly deposited to a checking or savings account.
By March 4, the IRS had issued more than 52 million refunds worth $161 billion for an average refund of $3,070.
For tax year 2010 returns, there are new savings bond options. Last year, if the taxpayer chose to receive a savings bond as part of the refund, it could only be issued in the taxpayers’ name. This year, taxpayers can designate anyone to receive a savings bond and also designate the co-owner or beneficiary. Also a new section was added to Form 8888, Allocation of Refund (Including Savings Bond Purchases), for entering savings bond information so that taxpayers no longer need to enter a pre-specified routing number. Instead, taxpayers will enter the bond owner’s name. The savings bonds will be mailed to the taxpayer or the person designated on the form.
Taxpayers who claim a tax refund on Form 1040 can use Form 8888 to split their refunds. Refunds can be directed into bank accounts and other financial institutions where their mutual funds or retirement accounts are managed and to purchase U.S. Series I Savings Bonds. Taxpayers can choose to use a portion of the refund to buy up to $5,000 in low-risk savings bonds, which earn interest and protect owners against inflation. The bonds must be purchased in $50 increments. Direct deposit of any remaining refund amounts is no longer required. Paper checks can be requested for the balance.
During 2010, more than 99,000 bonds were purchased using Form 8888, totaling more than $11 million dollars. To check the status of a bond purchase request, go to the “Where’s My Refund” section of IRS website, www.irs.gov. If the IRS has already processed the refund and placed the request for the bond, then the tax filer should contact Treasury Retail Securities at 1-800-245-2804.
Canceled Debt on a Foreclosure or Short Sale Can be Exempt From Taxes
IRS debt guidance really hits home
Sunday, March 13, 2011 – Updated 3 days ago
WASHINGTON — The IRS has issued fresh guidance on how to handle canceled mortgage debt in the upcoming tax season — just as hundreds of thousands of homeowners have negotiated loan modifications or short sales or have been foreclosed upon during the past year.
It’s a huge issue, widely misunderstood by consumers, and involves potentially billions of dollars of tax liability.
When most debts are canceled by a creditor, such as unpaid balances on student loans or credit cards, the forgiven amounts are treated as ordinary, taxable income by the Internal Revenue Code. But under a special exemption adopted by Congress covering distressed home mortgages, many owners can escape the ultimate double-whammy: getting hit with extra taxes because your mortgage went seriously delinquent or you lost your house.
In its latest guidance, the IRS focuses on several key points that owners — and former owners — need to know. Tops on the list: Just because a lender wrote off a portion of your mortgage debt, this doesn’t mean you automatically qualify for special tax treatment. To the contrary, there are essential tests you need to pass to qualify: The debt your lender canceled must have been used by you “to buy, build or substantially improve your principal residence.”
There’s a lot packed into these words, so it’s important to parse them carefully. Start with the house itself. It can’t be your second home; it can only be your main residence, and fully documentable as such.
Next, the unpaid mortgage balance your lender canceled as part of a modification, short sale or foreclosure cannot have been used for non-qualifying purposes, like for something other than acquiring or constructing the house or making capital improvements to it. Refinanced mortgage debt used for kids’ tuitions, vacations, buying cars or paying off credit card bills won’t make the grade.
The IRS offers a hypothetical example of how borrowers can mess up their chances for tax relief. A taxpayer took out a first mortgage of $800,000 when he purchased his home years ago. Thanks to strong appreciation in property values, the house was soon worth $1 million and the owner refinanced the mortgage to $850,000. The loan balance at the time of the refinance was down to $740,000, and the owner used the $110,000 in cash-out proceeds to buy a new car and pay off credit card debts.
Bad move. A year or two later — presumably well into the recession and housing bust — the home value had plunged to between $700,000 and $750,000. The owner then convinced his bank to allow a short sale for $735,000 and to cancel the remaining $115,000 of unpaid debt.
Does the owner get tax relief on the full $115,000 under Congress’ special exemption? No way, according to the IRS. He only escapes income taxes on just $5,000 of the $115,000 because he spent the other $110,000 on a car and credit card balances — neither of which counts as “qualified principal residence” debt.
Greg A. Rosica, a tax partner with accounting giant Ernst & Young, says misunderstandings of the rules about mortgage debt forgiveness are “commonplace.” People often don’t know that the money they used for vacations and other purposes “just will not qualify” under IRS rules. Taxpayers who walk away from their houses may be liable for taxes, said Rosica, if at some point the property “no longer was their primary residence” — say it was converted into a rental property.
The IRS highlighted some other key points in its guidance:
• Mortgage cancellation relief is capped at $2 million for singles and married taxpayers, $1 million for married owners filing separately.
• Anyone who’s had mortgage debt cancellation as part of a loan modification or foreclosure should go to IRS.gov and download Form 982 and IRS Publication 4681 for additional filing details. Alternatively they can call 800-TAX-FORM to request copies. Lenders who write off unpaid mortgage balances typically provide borrowers with a year-end IRS form 1099-C cancellation of debt statement, including the amount of the loan forgiven and the fair market value of the property.
If you’ve had mortgage debt canceled but have never received a 1099-C from your lender, get in touch and request it if you want to avoid federal tax hassles
March 15 Deadline For Corporate Tax Returns and Annual Reports
On March 15,2011 all corporations with a 12/31 tax year must file federal and state tax returns or extensions. All tax returns are due two and a half months after a corporation’s year end. Typically corporations would initially file the six month automatic extension making the tax return due date 9/15/2011 if the tax return were delayed. All taxes due must be paid with the extension. The as filed tax return will determine whether taxes were under or over estimated. C Corporations pay federal income tax, while S Corporations don’t, since the income is recorded on the shareholder’s own tax returns.
In Massachusetts a state excise tax is due on 3/15/2011 with a minimum of $456 for S Corporations with no taxable assets. New Hampshire corporate income taxes are also due on this date. New Hampshire taxes corporations meeting certain criteria on payroll and income tax. New Hampshire does not make a distinction between C Corporations and S Corporations because its residents pay no personal income tax.
Patriot can handle all S Corporation and C Corporation reporting requirements both tax and compliance in all states.
Call Blaine at (978) 604-4253 for more details or email patstax@gmail.com
IRS budget in crosshairs of spending fight
If the Internal Revenue Service is able to hire more enforcement agents, will the federal budget deficit shrink?
The White House says yes. President Obama’s budget for 2012 includes millions more dollars to enforce the tax code — money that the IRS would use to identify and pursue tax cheats.
Turns out, IRS agents make good on the investment, collecting $3 to $4 for every greenback spent tracking down money owed to the government. The funds help bring down the deficit.
One problem: The IRS is facing a potential big cut in its budget.
The Republican spending plan for the rest of the fiscal year would strip the IRS of $600 million in funding — including $285 million from the agency’s enforcement budget. In addition to their fervor to cut spending, some Republicans want to starve the IRS of resources it needs to implement last year’s health care reform law.
But the IRS says that cuts of that size would reduce revenue collection by at least $4.1 billion as the agency rolled back enforcement activities.
Democratic lawmakers are crying foul, saying that if the GOP was serious about the deficit, it would be giving more money to the IRS.
The agency is already feeling a budget crunch, because it has been stuck at 2010 funding levels after lawmakers failed to pass a budget even though the fiscal year began 159 days ago.
The GOP plan for the remaining seven months of the fiscal year stands in stark contrast to the approach being pursued by Obama.
The White House has asked for more money for the IRS in each of its budgets, and wants a 9% increase from current levels in 2012.
Over the last decade, the agency has sharply increased the number of audits, liens and property seizures it carries out. The IRS believes that such enforcement results in additional gains as more Americans pay their taxes out of fear of an audit.
If Obama’s budget were to make it through Congress, the IRS estimates that the increase in its enforcement budget would boost general revenue by more than $1.3 billion annually by 2014.
It’s easy to see the plan’s appeal — revenue goes up, while tax rates and spending levels stay static. Any money spent on increased IRS enforcement is easily covered by the returns.
But not everyone is convinced by the IRS argument that increased enforcement means more tax revenue.
“Nobody checks if those return rates are valid, or where the law of diminishing marginal returns kicks in,” said J.D. Foster, a senior fellow at the conservative Heritage Foundation.
Even more suspect, according to Foster, is the IRS claim that its enforcement efforts result in a secondary deterrent factor that encourages Americans to pay their taxes.
“It’s the silliest argument of all,” said Foster. “If the the IRS gets a billion more for enforcement, does anybody know that? Of course not.”
Some disagree, including Robert McKenzie, a member of the IRS Advisory Council and lawyer at Arnstein & Lehr, who worked at the IRS collection division in the 1970s.
McKenzie says the effect is very real, because in the “dark recesses of every American mind” exists a healthy fear of an IRS audit.
For the IRS, the threat of cuts wouldn’t just mean less money for enforcement, it would also mean cutting back on jobs.
If funding drops by $600 million, the agency might be forced to lay off thousands of workers, according to Colleen Kelley, president of the National Treasury Employees Union, which represents IRS employees.
“If [the House bill] passes, there is no way you can make that money up in anything other than at some point … cutting a lot of positions,” Kelley said.
McKenzie, for one, thinks politics should be left aside.
“I think it’s mom and apple pie. Find people and ask them to pay the correct amount of tax,” he said.
FDIC Forces Banks to Pull Out of Refund Anticipation Loan Programs
From the Drake Software website:
February has seen more banks pulling out of the refund anticipation loan (RAL) business. Two FDIC–regulated banks will exit the business after the 2011 filing season; a third, Republic Bank, has chosen to fight a cease-and-desist order issued by the FDIC.
The cease-and-desist order was part of a “Notice of Charges” issued to Republic on February 10. In the Notice, the FDIC states that it considers Republic’s RAL program “unsafe and unsound” without the presence of the debt indicator.
Republic quickly published a statement that it finds the FDIC’s charges “without merit” and that it intends “to vigorously defend the Bank’s right to offer a legal product to those who wish to purchase the product.”
The FDIC’s filing opens the door to a possible administrative hearing. Republic has 60 days (from the date of the filing) to contest the Notice; clearly it intends to.
A day after the Republic’s response, on February 11, Ohio Valley Banc Corp (another FDIC-regulated bank) announced that it would be closing down its RAL business at the end of the 2011 filing season [link: ]. It cited an FDIC “recommendation … to discontinue offering refund anticipation loans…”
On the heels of Ohio Valley’s announcement, River City Bank posted on its website that, “following extensive conversations with its primary regulator, the FDIC, regarding FDIC’s concerns about RALs,” it, too would be exiting the RAL business at the end of the 2011 season.
These exits aren’t the first; OCC–regulated banks JPMorgan Chase and HSBC stepped off the RAL stage in 2010—Chase in April, and HSBC in December. The HSBC action, prompted by a regulatory directive by the OCC, was particularly high-profile, as HSBC was the RAL source for H&R Block, the country’s largest tax-preparation firm.
Republic funds RALs for both Jackson Hewitt and Liberty Tax Service—the second- and third-largest tax-preparation firms in the U.S., respectively. Jackson Hewitt’s shares dropped markedly following FDIC’s Notice of Intent to Republic, and are still down as of this writing. Liberty is not a publicly traded entity.
With Chase and HSBC gone, River City, and Ohio Valley on their way out, and Republic making what might be its last stand, it looks like February has seen the pounding of just two more nails in the coffin of the RAL industry.
Nina Rogers, Technical Writer
Federal Tax Development, Drake Software
IRS Was Choking on E-File Volume and Tax Changes
From Intuit:
IRS Return Processing – Week of February 14, 2011
Situation:
Late on Friday evening, Intuit learned from the IRS that the Service is limiting the number of returns it accepts daily from all e-file transmitters during February 14-18. They are implementing the flow control in order to manage their systems capacity and ensure successful filings of all returns, including those that were affected by the “Schedule A delays.” As a result, Intuit has a maximum number of returns we can remit to the IRS each day. Therefore, tax professionals who submit returns to Intuit early in the week may not receive acknowledgements from the IRS until later in the week.
We are working closely with the IRS to process all tax returns as quickly as their systems will allow, but we suggest that tax professionals stagger the number of returns they submit over the course of the week, rather than submit all returns on the first day or two of processing.
As a result of the IRS staged transmissions over the course of the week of Feb. 14-18, some customers may experience delays in return processing and in the time it takes to receive their refunds. However, we expect that all processing should be back into the standard processing flow by Friday, Feb. 18, and, based on our projections, we believe that the vast majority of Intuit’s professionally prepared returns will be accepted normally throughout the week.
Helping the IRS manage its systems capacity in the first week of e-filed submissions – in this unusual year of forms delays – is in the interest of achieving a successful season for our tax professionals and their clients. Although we understand getting your clients’ refunds quickly is important, we also know that the IRS is processing returns as rapidly as possible.
We have provided you with as much information as we currently know from the IRS on the Intuit ProLine News Central blog and in our support web pages. We will keep you informed as we learn more from the IRS.
General Information
| Doc ID: | GEN80879 | |
| Updated: | 2/14/2011 | |
| Categories: | E-file, Individual, 2010, ProSeries, ProSeries Basic, ProLine Tax Online Edition, Lacerte Tax |
IRS tax liens jump by 60%, but how effective are they?
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The IRS filed more than 1 million liens in federal fiscal year 2010, the highest in nearly two decades and a spike from the nearly 684,000 filed in the year ahead of the recession’s December 2007 start, according to the annual report to Congress issued Wednesday by the National Taxpayer Advocate.
Although the IRS has taken some steps to aid financially struggling taxpayers, it “has continued the trend toward more lien filings despite the worst economy in at least a generation” — with serious financial impact on some of those unable to pay, the taxpayer advocate report concluded.
“Lien filings can badly damage or destroy a taxpayer’s creditworthiness because they are picked up by the credit-rating agencies and retained on the taxpayer’s credit reports for seven years from the date the tax liability is resolved, or longer if it is not resolved,” wrote Nina Olson, who heads the Taxpayer Advocate’s office.
For those with IRS liens filed against their property, that can mean it’s harder to get a job, find affordable housing or buy insurance.
Despite the increase in liens, the report said IRS payment coding protocols make it impossible to determine how much revenue the collection effort generates. Since the IRS pays to process the liens and file them with local county clerks, the report said it is “questionable whether liens generate much, if any, direct revenue.”
The increase in lien filings continued a longer trend in which the report said the 2010 total soared 553% higher than the number filed in fiscal year 1999. The IRS said the comparison was misleading, because the agency reduced lien filings in 1999 while making legal changes under a 1998 restructuring of the agency.
IRS spokesman Terry Lemons said it has moved to help taxpayers facing collection problems. He said the IRS is starting a procedure to ensure its liens are withdrawn after tax debts are paid. That change, Lemons said, “will help struggling taxpayers who face hardship caused by having a lien.”
Olson, however, said the IRS should determine whether its lien-filing policies balance efficient tax collection “with the legitimate concern of taxpayers that any collection action be no more intrusive than necessary.”
Comprehensive List of Healthcare Bill Tax Implications
No more million dollar health care executive jobs. Innovative drug companies punished. Hospitals taxed. 1099′s for all. Read more below:
“Comprehensive List of Tax Hikes in Obamacare”
From Ryan Ellis atr.org on Friday, January 14, 2011 6:00 AM
Next week, the U.S. House of Representatives will be voting on an historic repeal of the Obamacare law. While there are many reasons to oppose this flawed government health insurance law, it is important to remember that Obamacare is also one of the largest tax increases in American history. Below is a comprehensive list of the two dozen new or higher taxes that pay for Obamcare’s expansion of government spending and interference between doctors and patients.
Individual Mandate Excise Tax(Jan 2014): Starting in 2014, anyone not buying “qualifying” health insurance must pay an income surtax according to the higher of the following
| 1 Adult | 2 Adults | 3+ Adults | |
| 2014 | 1% AGI/$95 | 1% AGI/$190 | 1% AGI/$285 |
| 2015 | 2% AGI/$325 | 2% AGI/$650 | 2% AGI/$975 |
| 2016 + | 2.5% AGI/$695 | 2.5% AGI/$1390 | 2.5% AGI/$2085 |
Exemptions for religious objectors, undocumented immigrants, prisoners, those earning less than the poverty line, members of Indian tribes, and hardship cases (determined by HHS)
Employer Mandate Tax(Jan 2014): If an employer does not offer health coverage, and at least one employee qualifies for a health tax credit, the employer must pay an additional non-deductible tax of $2000 for all full-time employees. This provision applies to all employers with 50 or more employees. If any employee actually receives coverage through the exchange, the penalty on the employer for that employee rises to $3000. If the employer requires a waiting period to enroll in coverage of 30-60 days, there is a $400 tax per employee ($600 if the period is 60 days or longer).
Combined score of individual and employer mandate tax penalty: $65 billion/10 years
Surtax on Investment Income ($123 billion/Jan. 2013): This increase involves the creation of a new, 3.8 percent surtax on investment income earned in households making at least $250,000 ($200,000 single). This would result in the following top tax rates on investment income
| Capital Gains | Dividends | Other* | |
| 2010-2012 | 15% | 15% | 35% |
| 2013+ (current law) | 23.8% | 43.4% | 43.4% |
| 2013+ (Obama budget) | 23.8% | 23.8% | 43.4% |
Excise Tax on Comprehensive Health Insurance Plans($32 bil/Jan 2018): Starting in 2018, new 40 percent excise tax on “Cadillac” health insurance plans ($10,200 single/$27,500 family). For early retirees and high-risk professions exists a higher threshold ($11,500 single/$29,450 family). CPI +1 percentage point indexed.
Hike in Medicare Payroll Tax($86.8 bil/Jan 2013): Current law and changes:
| First $200,000 ($250,000 Married) Employer/Employee |
All Remaining Wages Employer/Employee |
|
| Current Law | 1.45%/1.45% 2.9% self-employed |
1.45%/1.45% 2.9% self-employed |
| Obamacare Tax Hike | 1.45%/1.45% 2.9% self-employed |
1.45%/2.35% 3.8% self-employed |
Medicine Cabinet Tax($5 bil/Jan 2011): Americans no longer able to use health savings account (HSA), flexible spending account (FSA), or health reimbursement (HRA) pre-tax dollars to purchase non-prescription, over-the-counter medicines (except insulin)
HSA Withdrawal Tax Hike($1.4 bil/Jan 2011): Increases additional tax on non-medical early withdrawals from an HSA from 10 to 20 percent, disadvantaging them relative to IRAs and other tax-advantaged accounts, which remain at 10 percent.
Flexible Spending Account Cap – aka“Special Needs Kids Tax”($13 bil/Jan 2013): Imposes cap of $2500 (Indexed to inflation after 2013) on FSAs (now unlimited). . There is one group of FSA owners for whom this new cap will be particularly cruel and onerous: parents of special needs children. There are thousands of families with special needs children in the United States, and many of them use FSAs to pay for special needs education. Tuition rates at one leading school that teaches special needs children in Washington, D.C. (National Child Research Center) can easily exceed $14,000 per year. Under tax rules, FSA dollars can be used to pay for this type of special needs education.
Tax on Medical Device Manufacturers($20 bil/Jan 2013): Medical device manufacturers employ 360,000 people in 6000 plants across the country. This law imposes a new 2.3% excise tax. Exemptions include items retailing for less than $100.
Raise “Haircut” for Medical Itemized Deduction from 7.5% to 10% of AGI($15.2 bil/Jan 2013): Currently, those facing high medical expenses are allowed a deduction for medical expenses to the extent that those expenses exceed 7.5 percent of adjusted gross income (AGI). The new provision imposes a threshold of 10 percent of AGI; it is waived for 65+ taxpayers in 2013-2016 only.
Tax on Indoor Tanning Services($2.7 billion/July 1, 2010): New 10 percent excise tax on Americans using indoor tanning salons
Elimination of tax deduction for employer-provided retirement Rx drug coverage in coordination with Medicare Part D($4.5 bil/Jan 2013)
Blue Cross/Blue Shield Tax Hike($0.4 bil/Jan 2010): The special tax deduction in current law for Blue Cross/Blue Shield companies would only be allowed if 85 percent or more of premium revenues are spent on clinical services
Excise Tax on Charitable Hospitals(Min$/immediate): $50,000 per hospital if they fail to meet new “community health assessment needs,” “financial assistance,” and “billing and collection” rules set by HHS
Tax on Innovator Drug Companies($22.2 bil/Jan 2010): $2.3 billion annual tax on the industry imposed relative to share of sales made that year.
Tax on Health Insurers($60.1 bil/Jan 2014): Annual tax on the industry imposed relative to health insurance premiums collected that year. The stipulation phases in gradually until 2018, and is fully-imposed on firms with $50 million in profits.
$500,000 Annual Executive Compensation Limit for Health Insurance Executives($0.6 bil/Jan 2013)
Employer Reporting of Insurance on W-2(Min$/Jan 2011): Preamble to taxing health benefits on individual tax returns.
Corporate 1099-MISC Information Reporting($17.1 bil/Jan 2012): Requires businesses to send 1099-MISC information tax forms to corporations (currently limited to individuals), a huge compliance burden for small employers
“Black liquor” tax hike(Tax hike of $23.6 billion). This is a tax increase on a type of bio-fuel.
Codification of the “economic substance doctrine”(Tax hike of $4.5 billion). This provision allows the IRS to disallow completely-legal tax deductions and other legal tax-minimizing plans just because the IRS deems that the action lacks “substance” and is merely intended to reduce taxes owed.
IRS Will Delay Processing Itemized Returns Due to Changes
50 million taxpayers must delay filing – IRS
By David Goldman, staff writerDecember 31, 2010: 11:14 AM ET
NEW YORK (CNNMoney) — Itemize your tax deductions? Itching for a refund? You’re going to have to wait.
The IRS said that it needs until mid- to late-February to reprogram its processing systems because Congress acted so late this year cleaning up the tax code. The bill, which includes deductions for state and local sales taxes, college tuition and teacher expenses, wasn’t signed into law until Dec. 17.
The bill ensured that the federal income tax rates would not change, and itemized deductions will continue to be allowed in full for high-income taxpayers.
As a result, the 50 million taxpayers who itemize their deductions will have to hold off for a bit before they file. Of course, not everyone files early: only about 9 million of the 140 million U.S. tax filers filed in January or February of last year.
“The majority of taxpayers will be able to fill out their tax returns and file them as they normally do,” said IRS Commissioner Doug Shulman in a statement. “The IRS will work through the holidays and into the New Year to get our systems reprogrammed and ensure taxpayers have a smooth tax season.”
The delay affects both paper and electronic filers who itemize deductions on Form 1040 Schedule A. That includes those claiming the new Educator Expense Deduction, which credits grade school teachers for out-of-pocket expenses of up to $250.
It also includes those claiming deductions for college students, covering up to $4,000 of tuition, which is claimed on Form 8917, though the IRS said there will be no delays for those that claim other education tax credits.
Though itemizers can work on their tax returns before the IRS is ready to accept them, the government said people should not send them in before it is ready to process the returns.
The IRS hasn’t yet said exactly what day it will be able to begin processing the impacted tax returns, but it expects to announce that date “in the near future.”
Surprise! Surprise! Surprise! :Tax Bills Go Out For Making Work Pay Credit
13M get unexpected tax bill from Obama tax credit(AP) – 1 day ago
WASHINGTON (AP) — About 13.4 million taxpayers may be getting unexpected tax bills because they were awarded too much money under President Barack Obama’s Making Work Pay tax credit, a government audit said Thursday.
The tax credit, which expires Jan. 1, was designed to increase take-home pay by about $8 a week through new tax withholding tables. The credit was capped at $400 for individuals and $800 for married couples filing jointly.
However, the credit put millions of taxpayers at risk for not having enough taxes withheld from their paychecks, resulting in a tax bill when they file their returns, said the audit by J. Russell George, the Treasury inspector general for tax administration.
Those at risk included people with multiple jobs, married couples who both work, Social Security recipients who also work, and young workers who are also claimed as dependents on their parents’ tax returns.
“The Making Work Pay credit is a key tax credit designed to increase spending and stimulate the economy,” George said. “However, many taxpayers who are accustomed to receiving refunds when they file their tax returns may have owed taxes and incurred penalties in 2009, and may yet again in 2010, because they were advanced more of the credit than they were entitled to claim.”
The Internal Revenue Service reported that the average tax refund was $2,892 in the 2010 filing season, up from $2,663 in 2009. However, the number of refunds dropped by 3.5 percent, to 93.3 million.
The audit says the Making Work Pay credit could have been a factor in the reduced number of refunds.
The credit was Obama’s signature tax break in the massive economic recovery package passed in 2009. The IRS moved quickly to start getting the new tax credit to workers, issuing new tax withholding tables four days after Obama signed the law.
About 122 million families and individuals have benefited from the credit, according to the agency’s written response to the audit.
The IRS says it undertook an aggressive campaign in 2009 and 2010 to warn at-risk taxpayers that they might not be withholding enough money from their pay, including public service announcements and YouTube videos.
The agency regularly advises taxpayers to check their withholding so they don’t get a surprise tax bill when they file their returns.
“This provision was specifically intended to help taxpayers through the severe economic downturn by putting more money into their hands right away, in each paycheck,” wrote Richard Byrd, commissioner of the agency’s wage and investment division.
Copyright © 2010 The Associated Press. All rights reserved.