Daily Tax Update - February 25, 2011: Subcommittee On Select Revenue Measures Schedules Hearing On Small Businesses and Tax Reform

SUBCOMMITTEE ON SELECT REVENUE MEASURES SCHEDULES HEARING ON SMALL BUSINESSES AND TAX REFORM:  On March 3, the House Ways and Means Subcommittee on Select Revenue Measures will hold a hearing on the "special burdens that the tax code imposes on small businesses and pass-through entities and the need for comprehensive tax reform to address these problems."  In announcing the hearing, Subcommittee Chairman Pat Tiberi (R-OH) said, "Today, more than half of all business income earned in the United States is earned by pass-through entities, the vast majority of which are small businesses.  While I applaud President Obama’s interest in pursuing corporate tax reform, we cannot ignore the special problems faced by small businesses that must devote scarce resources to tax compliance and tax planning instead of to business expansion and job creation.  This hearing will allow the Committee to better understand these issues."  The witness list has not been announced.

  • According to the Subcommittee’s press release, "Some advocates of tax reform have suggested limiting that effort solely to corporate tax reform while postponing consideration of reforming the individual income tax.  Such an approach ignores three important facts: (1) more than half of active business income earned in the United States is earned by pass-through entities (sole proprietorships, partnerships, and S corporations) and is therefore subject to the individual income tax rates, not the corporate rate; (2) business tax preferences that presumably would be curtailed to offset the revenue loss caused by a reduction in the corporate rate generally are available to pass-through entities as well, meaning that such entities (most of which are small businesses) could end up paying higher taxes to finance a cut in corporate income taxes; and (3) small businesses face a tremendous administrative burden in complying with the tax code, as they must comply with rules designed for large corporations, even though they often have only a fraction of the resources."

IRS ANNOUNCES STEPS TO ASSIST STRUGGLING TAXPAYERS:  Yesterday, the IRS announced new policies and programs to help taxpayers pay back taxes and avoid tax liens.  IRS Commissioner Doug Shulman said, "We are making fundamental changes to our lien system and other collection tools that will help taxpayers and give them a fresh start.  These steps are good for people facing tough times, and they reflect a responsible approach for the tax system.  These steps are in the best interest of both taxpayers and the tax system.  People will have a better chance to stay current on their taxes and keep their financial house in order.  We all benefit if that happens."

  • The changes include:
    • Significantly increasing the dollar threshold when liens are generally issued, resulting in fewer tax liens.
    • Making it easier for taxpayers to obtain lien withdrawals after paying a tax bill.
    • Withdrawing liens in most cases where a taxpayer enters into a Direct Debit Installment Agreement.
    • Creating easier access to Installment Agreements for more struggling small businesses.
    • Expanding a streamlined Offer in Compromise program to cover more taxpayers.
  • Additional information can be accessed here.

MISCELLANEOUS GUIDANCE RELEASED:
Revenue Procedure 2011-20 provides information to any individual who failed to meet the eligibility requirements of section 911(d)(1) of the Internal Revenue Code because adverse conditions in a foreign country precluded the individual from meeting those requirements for taxable year 2010.  This revenue procedure lists the countries for which the eligibility requirements of section 911(d)(1) are waived for taxable year 2010.

Announcement 2011-20 advises hospital organizations described in § 501(c)(3) to delay filing their 2010 Form 990 until July 1, 2011.  Hospital organizations with return due dates prior to August 15, 2011 have been granted automatic three-month extensions of time to file and these affected hospital organization may rely that no late filing penalties under § 6652(c)(1)(A)(i) will apply if they file by their extended due dates. 

Notice 2011-14 providing guidance on the federal tax consequences of payments made to or on behalf of financially distressed homeowners under programs established pursuant to the Treasury Department’s Housing Finance Agency Innovative Fund for the Hardest-Hit Housing Markets and the Department of Housing and Urban Development’s Emergency Homeowners’ Loan Program.  This notice also provides guidance on the information reporting requirements for these payments.  

INTERNAL REVENUE SERVICE - CIRCULAR 230 DISCLOSURE:
As provided for in Treasury regulations, advice (if any) relating to federal taxes that is contained in this communication (including attachments) is not intended or written to be used, and cannot be used, for the purpose of (1) avoiding penalties under the Internal Revenue Code or (2) promoting, marketing or recommending to another party any plan or arrangement addressed herein.

STEPTOE & JOHNSON LLP - TAX PRACTICE
Steptoe & Johnson LLP has one of the largest and most diverse law firm tax practices in the country.  The practice covers the entire spectrum of federal taxation, including representation of businesses before the Congress, Treasury and the national office of the IRS; transactional planning for domestic and multinational corporations; complex audit and controversy work for corporations and other business interests contesting IRS adjustments; litigation before the Tax Court, Court of Federal Claims, district courts, courts of appeals and the Supreme Court.  The firm's tax practice also encompasses all aspects of employee benefits (ERISA), executive compensation, tax-exempt organizations and charitable giving.  Steptoe has an extensive state and local tax practice, representing an array of business clients on complex sales and use tax, corporate income tax and property tax matters, both advising those clients and handling audits, administrative appeals, and litigation for them.  Read more information on Steptoe's tax practice.