Practitioner email group:
Proposed Regulations Expand the Use of Electronic Payment System and Discontinue Paper Coupons Next Year
Still time to register for PTIN demo webinar
Join us Oct. 19 at 2 p.m. EDT for a free webinar demonstrating the new PTIN online registration system for tax professionals. The broadcast does not qualify for certificates of completion and is less than 15 minutes.
IR-2010-103, Oct. 12, 2010— The IRS today issued a draft Form W-2 for 2011 and announced it would defer the new requirement for employers to report the cost of coverage under an employer-sponsored group health plan until 2011.
http://www.irs.gov/newsroom/index.html?portlet=5
Friday is the extension deadline - for individuals and this year for SMALL EXEMPT ORGS that failed to file by May 17,2010. More -
http://www.irs.gov/newsroom/article/0,,id=228389,00.html?portlet=7
Legislative Update
On Thursday, September 30th, the President signed into law P.L. 111-249 (H.R. 6190, “Airport and Airway Extension Act of 2010, Part III.”) P.L. 111-249 extends taxes funding the Airport and Airway Trust Fund through December 31, 2010, and extends the Airport and Airway Trust Fund expenditure authority through January 1, 2011.
On Thursday, September 30th, the President signed into law P.L. 111-242 (H.R. 3081, “Making Further Continuing Appropriations for Fiscal Year 2011.”) P.L. 111-242 continues funding the IRS at FY 2010 enacted levels through December 3rd.
On Friday, October 1st, H.R. 946, “Plain Writing Act of 2010” was presented to the President. The President has 10 days (excluding Sundays) to sign the bill into law, veto it, or let it become law. H.R. 946 states that the purpose of the Act is to improve the effectiveness and accountability of Federal agencies to the public by promoting clear Government communication that the public can understand and use. Plain writing is defined as writing that is clear, concise, well-organized, and follows other best practices appropriate to the subject or field and intended audience.
1. IRS to Expand Competent Authority Program, Official Says * Tax Notes Today
2. Education Requirements, Exemptions Questioned at Circular 230 Hearing * Tax Notes Today
3. Tax Administration: Taxpayer Advocate Says IRS Overemphasizes Quantitative Measurements in Evaluations * BNA Daily Tax Report
4. Retirement Plans: IRS Schedules Oct. 21 Phone Forum on 401(k) Plan Compliance Questionnaire * BNA Daily Tax Report
5. Tax Exemptions: HIRE Act Aided Hiring of 8.1 Million, Treasury Says * BNA Daily Tax Report
6. Nonprofits Must File IRS Form 990 or Risk Losing Tax-Exempt Status *
7. Donating from Retirement Accounts * Wall Street Journal
8. Nonprofits at High Risk of Losing Tax Status *
Tax Notes Today, October 12, 2010
The IRS plans to expand the competent authority program under the new Large Business and International Division by hiring new analysts to work advance pricing agreement cases from start to finish, Michael Danilack, deputy commissioner (international) of LB&I, said October 7.
During an International Fiscal Association seminar held at Sutherland Asbill & Brennan LLP in Washington, Danilack discussed how the recent reorganization of the Large and Midsize Business Division into LB&I will affect the competent authority process. Danilack wants to "aggressively grow" the competent authority program, which now falls under the Competent Authority and International Coordination (CA&IC) subdivision of LB&I's international arm. He noted that 18 new CA analysts were hired last fall and that seven or eight more are coming on board. (For prior coverage, see Doc 2010-20630 or 2010 TNT 183-5.)
"And then we will be looking in the near term to bring on a substantial number of new CA analysts in somewhat of a different way," he said, adding that several positions have opened up on the West Coast for the first time and that the IRS hopes to establish a competent authority office there, most likely in San Francisco.
Danilack said CA&IC is working on a plan to have the new CA analysts work bilateral APA cases from start to finish. Under the current two-phase, two-team process, leaders from the APA team work with the taxpayer to develop a negotiating position, and they then hand the case off to CA analysts who take it to negotiations with the foreign government.
"What I'm entertaining is the idea that we can go down to a single phase with a single-team process to gain efficiencies, because there are obviously some inefficiencies when you have two groups sequentially working the same case," he said, adding that most countries use a single process for APAs.
Danilack said that hiring more skilled CA analysts and getting a West Coast office established in the next few months could be an effective way to reduce the substantial backlog of APA cases.
Asked what role the APA team will play if CA analysts work APA cases from start to finish, Danilack said it shouldn't change. "There's enough work there that I'm not putting it on the table that we're going to take away their work," he said. "I think what we're going to be doing is supplementing the program."
Once the new process is implemented and the backlog of cases is reduced, it might be appropriate to reevaluate the roles of CA analysts and APA team members, Danilack said, adding, "But for the time being and I think into the foreseeable future, APA can work side by side with CA on this, though there are technical and delegation issues that in the end are kind of meaningless."
Tax Notes Today, October 12, 2010
EDUCATION REQUIREMENTS, EXEMPTIONS QUESTIONED AT CIRCULAR 230 HEARING
While most speakers at an October 8 IRS hearing professed support for expanded IRS oversight for tax return preparation, many also requested that the agency rethink its proposal for handling continuing education and the scope of nonsigning preparer registration.
The public hearing gave practitioners another opportunity to express concern that, as written, proposed section 10.9(a)(2) seems to require the IRS Office of Professional Responsibility to preapprove every continuing education course offered to preparers. Lynn Freer of Spidell Publishing Inc. said such a requirement would be impractical. The number of annual continuing education tax courses offered to preparers runs into the thousands, creating an administrative headache for OPR if it reviews every single class. And continual changes in tax laws make it nearly impossible for education providers to keep content up to date with current law if the OPR has to preapprove the course, she said. (For REG-138637-07, see Doc 2010-18447 or 2010 TNT 161-3. For prior coverage, see Doc 2010-18508 or 2010 TNT 161-1.)
Freer recommended that the OPR look at only a limited sample of an education provider's class offerings and content and qualify the provider's courses if there are no warning flags requiring a more thorough review.
Edward S. Karl, vice president of taxation at the American Institute of Certified Public Accountants, similarly warned that the IRS's approach did not recognize "the volume of continuing education courses that will require IRS approval and the timeliness required in the approval process." He suggested the IRS establish a standard for exempting some continuing education providers from mandatory approval.
Robert Kerr, senior director of government relations for the National Association of Enrolled Agents, said the substantial burden imposed by course preapproval would limit the availability of in-person seminars because of additional costs. "There is a distinct value in the face-to-face exchange of ideas," he said.
"Why fix something that is not broken?" asked William Stevenson of National Tax Consultants Inc. The IRS should continue to trust its existing relationships with qualified education sponsors, he said. The IRS will face overwhelming logistical problems in approving individual courses, he warned.
National Society of Accountants Executive Vice President John Ams said the OPR should grant course approval based on preliminary programs. The OPR should also develop standardized procedures it intends to use to approve courses and make them available to course providers, he said.
Nonsigners
The hearing also continued the debate the IRS has been having with a large segment of the tax community over who must obtain a preparer tax identification number under the new preparer regime. Karl urged the IRS to exempt student interns and similarly situated individuals from the PTIN requirement, saying the current proposal is "clearly overreaching."
Asked by an IRS official how the AICPA's stance would allow the IRS to police offshore preparation activity, Karl said the standards promulgated by state boards would still apply to hold the signing preparer responsible for imprecise staff work.
Larry Gray, government liaison with the National Association of Tax Professionals, said practitioners need guidance before they start "playing the game" about which individuals are considered to be nonsigning preparers for Circular 230 purposes. Firms use several business models for how they prepare returns, which makes it difficult for everyone to be on the same page about who has to get a PTIN, he said.
Kathryn Fulton, H&R Block's senior vice president of government affairs, said the company does not have a problem with the IRS's nonsigning requirement because the firm only allows signing preparers to handle information going on a tax return. Thus, all its employees preparing returns will be registering for PTINs, she said. But she chided the IRS for not establishing the total costs of the preparer oversight program.
Competency Exams
Firms like H&R Block that have their own extensive procedures for testing, educating, and reviewing employee preparers should be exempted from the IRS exam and education requirements,
Also, the IRS should consider collapsing into one the outlined two competency tests expected to be administered to registered tax return preparers,
Karl asked the IRS to delay implementation of the proposed testing regime. "The IRS should first evaluate whether the use of PTINs and extension of Circular 230 to all practitioners, combined with IRS tracking initiatives, is sufficient to address unethical and incompetent tax return preparation," he said.
But Ams said the exam exemption for some practitioners should be dropped to ensure across-the-board competency. If past experience isn't a sufficient reason to allow some current non-Circular 230 preparers to avoid testing, then all preparers, regardless of their background, should have to pass the exam, he said. Being a CPA or attorney doesn't ensure sufficient knowledge to prepare a return, as such professionals can work in non-tax areas, he said.
Service Imprimatur?
Several speakers also questioned the IRS's proposal that currently unenrolled preparers who get a PTIN and pass the appropriate testing requirements be designated as registered tax return preparers. The concern is that such a title conveys to the public a higher level of competency and professional education than most such preparers will possess, said Karl, creating confusion about the extent of their capabilities.
Information Returns
Robert Richter, president-elect of the American Society of Pension Professionals and Actuaries, asked for clarification regarding the applicability of the PTIN requirement to individuals filing informational returns such as Form 5500, which satisfies an employee benefit plan's reporting obligations to the IRS and Department of Labor. Under section 6694, Form 5500 is considered a tax return, he said, but it is not clear whether the form is considered one under Circular 230.
Because most of the information on the form does not in any way end up on a tax return, the IRS should explain what components of preparing the form constitute tax return preparation that would necessitate getting a PTIN, Richter said. He suggested that only the individual with supervisory authority for filing the return register for a PTIN. "A balance should be struck between the benefits and the costs associated with being subject to the registration requirements," he said. Otherwise, the IRS risks being overbroad in applying Circular 230.
Public Awareness
Kerr asked the IRS to follow through with its stated goal of conducting a publicity campaign about how changes to tax return preparer registration affect taxpayers. The program's success "hinges on a successful communications strategy and enforcement regime," he said. To date, an organized plan hasn't been presented, but such a campaign should focus on the fact that preparers must sign and provide a PTIN on returns, as well as clearly lay out the privileges extended to each class of Circular 230 practitioner, he said. The IRS has "an obligation to distinguish between the new return preparers and the legacy Circular 230 practitioners," he said.
Mandi Matlock, commenting on behalf of the State Bar of Texas Tax Section, agreed that a strong public awareness campaign was vital to the IRS's success. She asked the IRS not to issue certificates to registered tax return preparers lest they appear to be getting the IRS's blessing.
Enrolled Agents
Stevenson said he was worried that the proposed Circular 230 amendments diminished the status of enrolled agents. The regulations seem to "blur the line between an enrolled agent and registered tax return preparer," he said. Because enrolled agents are specially registered with the IRS, the group should be exempt from PTIN registration and accompanying user fees, he said.
The IRS "is in danger of crucifying the EA designation through regulation," Stevenson warned. To avoid getting enrolled agents confused with registered tax return preparers in the public's mind, the IRS should keep enrolled agents in a separate category subject to OPR oversight, he said. An IRS official assured the audience that the agency was not seeking to denigrate the enrolled agent profession.
Kerr said the IRS should get rid of limited practice rights under section 10.3 for registered tax return preparers. Such preparers do not have the competency to negotiate or represent a taxpayer's interest during an examination, he said.
Conduct
Definitions of reckless behavior and gross incompetence should be clarified for consistency throughout the regulations, Karl said. He recommended the IRS adopt a "principles-based approach" to disciplining practitioners under Circular 230 for failure to meet the section 6694 preparer penalty standards.
Valid Authority?
Dan Alban of the Institute for Justice called the IRS's proposed changes to the preparer oversight regime "arbitrary and capricious." The rules threaten the right of unenrolled individuals to earn an honest living preparing tax returns, he said. Because existing sanctions and penalties can be used to thwart unethical return preparation behavior, the IRS "is not justified" in adopting the new regime, he said. "The IRS is exceeding its regulatory authority to regulate practitioners."
In fact, the IRS rules are patently not uniform in how they are applied to various types of preparers, Alban said. Providing for certain exemptions "creates a leg up in the market" for those preparers who will not be subject to testing or educational requirements, he said. "The IRS is pursuing an illegitimate interest."
BNA Daily Tax Report, October 12, 2010
Olson told a taxpayer advocacy conference at
"We are working on a piece right now that will be in the annual report to Congress in December which will show that ... they are not co-equal measures," Olson said.
"Accounting measures have gotten out of hand. And so what you have is people and groups being measured on how many liens do you issue, how many cases do you close. And cycle time is triumphant in the IRS."
Olson said a better measurement than cycle time, for example, would be the timeliness of responses to taxpayers. "I actually have a measure [for employees at the Taxpayer Advocate Service] on whether our employee educated the taxpayer."
Olson said "what you measure is going to drive the behavior that you get." For example, she said, an IRS study found that about half of taxpayers could not afford the payments in their streamlined installment agreements. IRS guidance to employees says they should only take five minutes to put taxpayers in a streamlined agreement, Olson said.
"So cycle time, cycle time, cycle time. You will not have a conversation with that taxpayer on whether they can actually afford it if you have to close the thing in five minutes," she said.
Olson made her remarks at a conference titled "Taxpayer Advocacy: Addressing Systemic Tensions During Tight Budget Times." It was sponsored by the Albany Law Clinic and
Taxpayer Rights Need Stressing, Says N.Y. Official.
Jack Trachtenberg, the
"Enforcement needs to be more targeted and commensurate with the nature and scope of the noncompliance being addressed," Trachtenberg said in his prepared remarks. "Fraud and deliberate noncompliance must be distinguished from other causes of noncompliance (honest mistakes, ignorance of the law, bad advice, ambiguous laws, insufficient agency guidance, economic hardship)."
Trachtenberg recommended a number of reforms, including changes in the state's offer-in-compromise program. He said the New York State Department of Taxation and Finance is drafting legislation that would change the program by removing or modifying the insolvency requirement; modifying the minimum offer requirement; and permitting offers based on hardship and effective tax administration. The bill also would streamline documentation requirements and increase transparency.
Trachtenberg also recommended setting a clear and definite statute of limitations for tax collection cases; establishing a due process hearing system for collections; and revising the parameters for triggering the seizures of businesses.
Jamie Woodward, the acting
"We think we can do it all," she said. "Part of doing it all is to make sure we have this balance of what we do in enforcement and collection ... and having the Taxpayer Rights Advocate."
Woodward said the department's flexibility is restricted in some ways by statutory limits set by the Legislature. She said, for example, the state cannot waive interest penalties that are set by statute nor can it write off very old tax liabilities.
Woodward also said the economy has had an impact on public perceptions of enforcement. "The same tools we used to use before in good years seem harsher," she said. "They seem more draconian, so we need to understand the context in which we do our work."
BNA Daily Tax Report, October 12, 2010
Retirement Plans: IRS Schedules Oct. 21 Phone Forum on 401(k) Plan Compliance Questionnaire
The Internal Revenue Service will present information about the agency's 401(k) compliance check questionnaire during an IRS Phone Forum scheduled for Oct. 21, IRS reported in the Oct. 8 issue of Employee Plans News.
The IRS phone forum, which was originally scheduled for Oct. 15, will be held at 2 p.m. Eastern time.
IRS expects to use results from the questionnaire to fine-tune computer algorithms it is developing for future use in selecting tax code Section 401(k) plan cases for examination (133 DTR G-6, 7/14/10).
Featured speakers will be Monika Templeman, director of employee plans examinations at IRS, and Janice Gore, area manager of employee plans examinations for the
Questions may be sent in advance to ep.phoneforum@irs.gov.
BNA Daily Tax Report, October 12, 2010
Tax Exemptions: HIRE Act Aided Hiring of 8.1 Million, Treasury Says
The Treasury Department reported Oct. 8 that the tax exemption in the Hiring Incentives to Restore Employment(HIRE) Act has been used to employ 8.1 million people who had been unemployed for at least 60 days.
"Targeted programs like the HIRE Act tax credit provide an incentive for private-sector employers to hire new workers sooner than they otherwise would," said Alan B. Krueger, Treasury's assistant secretary for economic policy.
Under the HIRE Act (Pub. L. No. 111-147), employers are not required to pay their 6.2 percent share of Social Security payroll taxes for the remainder of the year on any qualifying workers hired from Feb. 4 to Dec. 31. Employers that keep the workers on their payrolls for one year are eligible for an additional $1,000 credit for each worker.
Text of Treasury's news release is available at http:// www.ustreas.gov/press/releases/tg897.htm.
Nonprofits Must File IRS Form 990 or Risk Losing Tax-Exempt Status
By PHIL MULKINS World Action Line Editor
Dear Action Line: I understand there is some new law requiring tax-exempt, nonprofit organizations to file their Form 990 with the IRS by Oct. 15 or they lose their federal tax-exempt status. We have never heard of this before. Is it for real? - A Local Charity,
An Internal Revenue Service press release on this says a crucial Oct. 15 information Form 990 filing deadline looms for tax-exempt organizations required by law to file it with IRS or risk federal tax-exempt status revocation. At-risk nonprofits can preserve status by filing "required information returns" by Oct. 15, in a one-time relief program.
Tax exempt status: The Pension Protection Act of 2006 requires tax-exempt groups to file annual returns or submit electronic notices to IRS, and it states that tax-exempts failing to file for three consecutive years automatically lose their tax-exempt status.
Small nonprofits: Those at risk of losing their tax-exempt status for failure to file required returns for 2007, 2008 and 2009 can preserve this status by filing returns by Oct. 15. These include local sports associations and community support groups, volunteer fire and ambulance associations, social clubs, educational societies, veterans groups, church-affiliated groups, groups helping special needs, etc. See the agency's article, "One-time special filing relief program for small charities" at tulsaworld.com/IRScharity990deadline
At-risk list: A list of organizations at risk as of July 31 is posted at IRS.gov along with instructions on how to comply with the new law.
Two relief varieties: Two types of relief are available for "small exempt organizations": a filing extension for the smallest organizations required to file "Form 990-N Electronic Notice" and a voluntary compliance program for small organizations eligible to file "Form 990-EZ, Short Form Return of Organization Exempt From Income Tax."
Form 990-N: Small tax-exempt organizations with annual receipts of $25,000 or less can file an electronic notice Form 990-N, also known as the e-Postcard. File the e-Postcard on the IRS website, supplying the eight information items requested on the form.
Form 990-EZ: Under the voluntary compliance program, tax-exempt organizations eligible to file Form 990-EZ (those with gross receipts less than $500,000 and total assets less than $1,250,000) must file their delinquent annual information returns by Oct. 15 and pay a compliance fee.
Form 990 and Form 990-PF: Relief is not available to larger organizations required to file Form 990 or to private foundations filing Form 990-PF.
Revocation: Organizations not filing returns by Oct. 15 will have their tax-exempt status revoked. Those losing exemptions must reapply to regain them, and any income received between the revocation date and renewed exemption may be taxable. Donors contributing to at-risk organizations are protected until the final revocation list is published by the IRS.
Original Print Headline: Tax-exempts that fail to file may lose status
Read more from this
WALL STREET JOURNAL, October 10, 2010
Donating from Retirement Accounts
By TOM HERMAN
Q: Could you please tell me if the law has been extended, allowing contributions to be sent directly to a charity from an individual retirement account?
J.H.M.,
A: No. Congress adjourned recently without having taken action on this and many other tax laws that expired at the end of last year.
But don't give up hope -- yet.
Congress is scheduled to return in mid-November, after the elections, in what's known as a "lame duck" session. How much, if anything, lawmakers will accomplish during this period remains "unclear," says Tim Hanford, a consultant in
While it's never easy predicting what Congress will do, it's especially tricky right now because of uncertainty about what will happen on Election Day. Lawmakers "may end up doing nothing more than passing another continuing resolution to keep the government open until early next year," Mr. Hanford says.
Our Florida reader is asking about a law, which expired Dec. 31, 2009, that generally allowed taxpayers who were age 70 1/2 or older to transfer as much as $100,000 a year directly from an IRA to a qualified charity without having any of that transfer considered as taxable income.
One big attraction of this law was that the transfer typically counted toward the taxpayer's required minimum distribution for the year.
Charitable groups have been urging Congress to extend this provision. They say it has led to large amounts of charitable donations in recent years that might not otherwise have been made.
For more details on this and other tax breaks that expired at the end of last year, turn to a pamphlet issued by Congress's Joint Committee on Taxation (jct.gov). Look under publications for Publication JCX-3-10, dated Jan. 29, 2010.
Nonprofits at High Risk of Losing Tax Status
Little-known form is due now, IRS says
More than 1,000 of the region's tiniest nonprofit groups are at risk of losing their tax-exempt status if they miss a deadline this week for filing a tax form with the Internal Revenue Service.
Block clubs, youth football and baseball leagues and professional organizations are among the small groups that have yet to file with the IRS, as required by an obscure change in federal tax law in 2006.
Filling out the required Form 990-N -- through an online "e-postcard" -- is relatively simple and takes about 10 minutes, according to IRS officials.
But many of the groups on the IRS list are still unaware of this mandate, part of the Pension Protection Act of 2006.
The regulation was implemented to help the IRS keep track of tax-exempt groups and weed out organizations that no longer exist.
For years, nonprofit groups that received less than $25,000 in a given year were not required to make an annual filing with the IRS. Those groups with budgets of more than $25,000 have long had to file a Form 990 detailing their expenses and revenues.
IRS officials say they have been trying to get the word out since the law went into effect four years ago.
The agency sent a half-million letters to tax-exempt groups in 2006 and has followed up with notices, news releases and, most recently, letters to the editor in newspapers.
"We have been doing massive outreaches," said Dianne Besunder, IRS spokeswoman in
Still, tens of thousands of groups across the country have not responded, and many organizations said they were not aware of the new requirements.
Heidi Jones, a small-business and nonprofit group consultant and University at
The Pension Act of 2006 states that any tax-exempt group failing to file for three consecutive years automatically loses its federal tax-exempt status.
Groups that lose their tax-exempt status would be subject to federal taxes on any income they receive. And reapplying for exempt status would cost hundreds of dollars.
An initial deadline of May 17 was extended to Friday,Oct15 and the IRS developed a one-time relief program to get at-risk groups in compliance with the new regulations. The agency posted a list of groups that were out of compliance in July. More than 21,000 groups statewide made the list.
Stop the Violence Coalition was one of more than 1,100 groups in
The group, which takes in less than $25,000 a year, has been around since 2004, but organizers said they were not contacted directly by the IRS.
"We didn't know the status had changed," said Arlee Daniels, an organizer. "We found out through one of the agencies that helps us through the
The community group, which works to confront city violence, recently filled out the form and should be in compliance, Daniels said.
In
But when Evalyn Katz, the group's treasurer, recently tried to complete Form 990-N online, it was unavailable, she said.
The form could not be printed and mailed to the IRS, either, she said.
Claudia Lee, treasurer for the Martha Avenue Block Club, said she received a mailing recently from the IRS but had not paid much attention to it and was unsure of its significance.
"I didn't really understand what I had to do," she said. "Since you brought it to my attention, I'll go home and take a closer look at it."
The block club has never taken in much money, other than some dues and discretionary funding from the Buffalo Common Council, Lee said.
Lewis James, a volunteer who handles the bills and other duties for the
"I didn't get any direct mailing from the IRS or anything like that," he said.
The center has been around since 1984 and has used the same mailing address, he said.
Only a call from The Buffalo News alerted James to the pending deadline. "I just wouldn't have known otherwise," he said.
Some of the groups on the list are now defunct. The
The e-postcard, available by clicking on the IRS Web site, www.irs.gov, will "weed out all the organizations that are on our rolls but no longer exist," the IRS' Besunder said.
The
"We really don't want to see these groups lose their status," Jones said. "These little organizations do a lot for our communities."
Tax wrangling in Congress creates uncertainty about next year's paychecks, By Peter Whoriskey
With Congress in a muddle over tax rates for next year, uncertainty over how much to withhold from workers' pay has begun to worry the nation's payroll administrators.
Normally, the Treasury Department issues information on how much to take out of next years paychecks by mid-November, but this year the debate over how much to extend the George W. Bush tax cuts seems unlikely to be resolved by that time, and could drag into December or beyond.
The longer it drags on, the more likely it will complicate the processing of millions of paychecks in January. It can take as long as five weeks for some companies to make the adjustments under the new tables, payroll administrators said.
"Withholding is so personal to people," said Michael O'Toole, the American Payroll Association's director of government relations and publications. "People are apprehensive about whether Congress will act on time for them to produce accurate payrolls at the beginning of the year."
A Treasury representative declined to say how the department would handle the situation, should it drag out.
"We have a lot of flexibility on the release of the withholding tables," the representative said. "The president and [Treasury Secretary Timothy F.] Geithner are confident Congress will vote to approve middle-class tax relief before the end of the year."
One of the problems is that if Treasury based the withholding tables on current law, under which the Bush tax cuts would expire, millions of low- and middle-income taxpayers would see significant tax increases.
For example, a family with two children and income of $40,000 could see the amount withheld rise by as much as $165 monthly, according to calculations by Roberton Williams of the Tax Policy Center.
Many think that Congress will act to prevent that kind of rise.
"From the point of view of the economy, I don't think anyone thinks there should be a middle-class tax increase," said Eric Toder of the Tax Policy Center. "There's going to be a lot of confusion for taxpayers that results because Congress did not act in a timely manner, even if they were to act in November."
So even as Congress and the administration say they are confident that the tax legislation is forthcoming, people charged with calculating the size of the bite to take out of paychecks are increasingly nervous.
"People are starting to say, 'What are we going to do?' “ said Dennis Danilewicz, who is in charge of payroll at the NYU Langone Medical Center and a former president of the Payroll Association. “ Everyone is kind of at Congress's mercy."
