Daily Tax Update - June 21, 2011: Baucus to Examine Ways to Simplify Tax Code to Increase Compliance, Reduce Tax Gap

BAUCUS TO EXAMINE WAYS TO SIMPLIFY TAX CODE TO INCREASE COMPLIANCE, REDUCE TAX GAP AT TAX REFORM HEARING:  On June 28, the Senate Finance Committee will continue its series of hearings on tax reform with a discussion of options to increase tax compliance and reduce the federal tax gap – the estimated $345 billion in owed taxes that go unpaid each year.  The hearing, titled "Complexity and the Tax Gap: Making Tax Compliance Easier and Collecting what’s Due."

  • Chairman Baucus and the witnesses will evaluate the tax compliance difficulties individuals and small businesses face, and they will examine the scope and costs of those challenges.  They will also consider to what extent those difficulties contribute to the federal tax gap, how that gap affects the economy as a whole, and what it shows about the fairness of the tax code itself.
  • Witnesses at the hearing will include:
    • Mr. Michael Brostek, Director, Tax Policy and Administration, Strategic Issues, United States Government Accountability Office
    • Ms. Nina E. Olson, National Taxpayer Advocate, Internal Revenue Service
    • Mr. David Kirkham, President, Kirkham Motor Sports
    • Ms. Kris Carpenter, Founder and CEO, Sanctuary Spa and Salon

HATCH:  TAX REFORM AND DEFICIT REDUCTION SHOULD BE SEPARATE:  Senator Orrin Hatch (R-UT), Ranking member of the Senate Finance Committee said yesterday that tax reform and deficit reduction should be considered separately.  Hatch said, "Our complicated and burdensome tax system is a drag on our economy, on businesses and middle-class families, and on job creation. It must be reformed to maintain America's international competitiveness. However, tax reform should be kept separate from the debt reduction negotiations. If not, then fixing our broken tax system won't be the goal – raising taxes will be. That's a wrong-headed approach since spending is causing our debt crisis – not too few taxes. Furthermore, as one of the leading drivers of our debt, entitlements must be on the table in these negotiations or we will have solved nothing." 

  • Meanwhile, Treasury Secretary Timothy Geithner said today that it would be “unimaginable” for the U.S. to default on its debts and said there is "no doubt" that situation will be avoided.  However, Geithner said that the deficit reduction group led by Vice President Biden may not have everything resolved by the August 2nd deadline.  Geithner said, "We don’t see a realistic path to solving all of this at once in the next few weeks.  It’s just not possible."  Geithner added,
  • "We’re getting closer, but we need to make some progress this week to give everybody more confidence that there’s a framework that has the votes. Ultimately, what matters is how do we get the votes to pass it in the House and the Senate."
  • One member of the "Biden Group", Sen. Minority Whip Jon Kyl said yesterday, "If we haven’t made enough progress by the end of this week, we’re really going to have to reassess the situation."  Kyl also said that it could take four weeks for Congress to process any deal. Kyl said, "It’s going to take some time even if an agreement is reached, first of all to get it put together and then to give time for members of Congress and the public to adequately digest it and debate it and then vote on it. It may not all pass the first time around and so on."

MISCELLANEOUS GUIDANCE RELEASED TODAY:

Notice 2011-55 suspends information reporting requirement under sections 6038D and 1298(f) for taxpayers that may be subject to reporting under those sections for taxable years beginning on or after March 18, 2010, until the IRS releases new Form 8938 (Statement of Foreign Financial Assets) and a revised Form 8621 (Return by a Shareholder of a Passive Foreign Investment Company or Qualified Electing Fund).

TAX BILL INTRODUCED JUNE 20TH:

S.1233:  A bill to amend the Internal Revenue Code of 1986 to provide a credit against income tax to facilitate the accelerated development and deployment of advanced safety systems for commercial motor vehicles.
Sponsor: Sen Stabenow, Debbie [MI] (introduced 6/20/2011)   Cosponsors (None)

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.

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