current news

National Economic Council Director Lawrence H. Summers said that he does not expect comprehensive tax reform legislation in 2009. The IRS released guidance providing depreciation deduction tables for cars, trucks and vans and leased vehicles first placed in service in 2009 and also urged taxpayers needing more time to file their returns to electronically submit their requests for automatic six-month extensions by April 15.


Although Summers said that he does not expect comprehensive tax reform legislation in 2009, he noted that the tax code will have to be revisited at some point, "probably sooner than later". Summers cited changes in the alternative minimum tax (AMT) as one area that is likely to be addressed in a major overhaul of the tax system.


President Obama recently directed the economic advisory board headed by former Federal Reserve Board Chairman Paul Volcker to provide recommendations to overhaul the tax system by December 4, 2009. The Volcker board will examine off-shore tax havens, transfer pricing and other complex international tax transactions. In addition, it is expected to consider measures to streamline several existing tax credits.

Vehicle Deductions. The IRS issued depreciation deduction tables for cars, trucks and vans and leased vehicles first placed in service in 2009 (Rev. Proc. 2009-24, TAXDAY, 2009/04/10, I.2). For cars, the deduction limitations for the first three tax years are $2,960 ($10,960 with bonus depreciation), $4,800 and $2,850, and $1,875 for each succeeding year. For trucks and vans, the limits are $3,060 ($11,160 with bonus depreciation), $4,900 and $2,950, and $1,775 for each succeeding year.



Making Work Pay Credit. The IRS on its website (www.irs.gov) warned pensioners that they do not qualify for the making work pay credit unless they receive earned income. However, the new withholding tables issued by the IRS apply to all taxpayers, including pensioners.



First-Time Homebuyer Credit. The IRS is working on guidance that will confirm the position that taxpayers may not claim the first-time homebuyer credit in advance. Its position is reportedly that the form clearly asks for "date of purchase" and that Congress would have used other statutory language if it had intended the credit to fund the downpayment. Some taxpayers apparently have been claiming the credit for an anticipated pre-December 1, 2009, purchase on a 2008 return before closing takes place. Sources further revealed that the IRS is likely to issue this guidance as a Q&A on the IRS website.



Filing Deadline. The IRS urged taxpayers needing more time to file their returns to electronically submit their requests for automatic six-month extensions by April 15 (IR-2009-36; TAXDAY, 2009/04/08, I.2). All taxpayers can e-file Form 4868 at no cost from a home computer, using the IRS Free File program or the Free File fillable forms. Certain taxpayers have more time to file: military members serving in combat zones and disaster victims from Minnesota, North Dakota and Oklahoma.



Convenience Charges. The IRS has changed its position and determined that convenience fees charged for paying individual income taxes by credit or debit cards are deductible if taxpayers itemize their deductions and have miscellaneous expenses exceeding 2 percent of adjusted gross income (IR-2009-37; TAXDAY, 2009/04/08, I.3). Card processors typically charge a fee averaging 2.5 percent of the tax payment.



Interest and Penalties. The IRS reminded taxpayers that they will owe interest and penalties if they do not pay their taxes in full by April 15 (IR-2009-39; TAXDAY, 2009/04/10, I.1). If they fail to file their returns or extensions by April 15, they will also owe a failure-to-file penalty. Taxpayers who cannot pay in full may apply for short-term payment extensions, including an installment agreement.



Filing Reminders. The IRS provided last-minute reminders to taxpayers to file and pay on time, file electronically, use IRS Free File on www.irs.gov, choose direct deposit for refunds, make sure their paper-returns are error free (to speed processing), consider electronic payment options, request extensions of time to file, apply for installment agreements, and avoid scams that ask for personal and financial information (IR-2009-40; TAXDAY, 2009/04/13, I.6).



Energy. The IRS issued guidance allocating Code Sec. 48B credits of $250 million under the second phase of the qualifying gasification project program (Notice 2009-23; TAXDAY, 2009/04/07, I.1). The Phase I credit allocation totaled $350 million. Applications for Phase II certification may be submitted beginning March 13, 2009, and ending March 12, 2012.



Qualifying Advanced Coal Project Program. The IRS issued procedures for allocating credits under Phase II of the qualifying advanced coal project program (Notice 2009-24; TAXDAY, 2009/04/07, I.2). Legislation enacted in 2008 increased the credit rate to 30 percent and authorized the IRS to allocate an additional $1.25 billion in credits to projects that separate and sequester 65-70 percent of total carbon dioxide emissions.



Inflation Adjustment Factor. The IRS announced that the 2009 inflation adjustment factor for renewable electricity production and refined coal production is 1.471 (TAXDAY, 2009/04/09, I.2). The inflation adjustment factor for Indian coal is 1.083. The 2009 reference price for wind facilities producing electricity is 4.32 cents per kilowatt hour. The 2009 reference price for fuel used as feedstock is $39.72 per ton.



QECBs. The IRS announced the allocation of the national $3.2-billion volume cap among the states for issuing qualified energy conservation bonds (QECBs) (Notice 2009-29; TAXDAY, 2009/04/07, I.3). The IRS provided interim guidance on the credit rate, sinking fund yield, information reporting, eligible issuers, and allocations by states to large local governments.



Renewable Energy Bond Applications. The IRS and Treasury are soliciting applications for allocating the $2.4-billion volume cap for issuing new clean renewable energy bonds under Code Sec. 54C(a) (Notice 2009-33; TAXDAY, 2009/04/07, I.4). Applications must be filed by August 4, 2009. The IRS provided guidance on eligibility requirements, application requirements, the allocation method and certain aspects of the law.