IR-2008-30, March 3, 2008

WASHINGTON – The Internal Revenue Service today announced that interest rates for the calendar quarter beginning April 1, 2008, will drop by one percentage point. The new rates will be:
 
• six (6) percent for overpayments [five (5) percent in the case of a corporation];
• six (6) percent for underpayments;
• eight (8) percent for large corporate underpayments; and
• three and one-half (3.5) percent for the portion of a corporate overpayment exceeding $10,000.

Under the Internal Revenue Code, the rate of interest is determined on a quarterly basis.  For taxpayers other than corporations, the overpayment and underpayment rate is the federal short-term rate plus 3 percentage points.  Generally, in the case of a corporation, the underpayment rate is the federal short-term rate plus 3 percentage points and the overpayment rate is the federal short-term rate plus 2 percentage points. 

The rate for large corporate underpayments is the federal short-term rate plus 5 percentage points.  The rate on the portion of a corporate overpayment of tax exceeding $10,000 for a taxable period is the federal short-term rate plus one-half (0.5) of a percentage point.

The interest rates announced today in Revenue Ruling 2008-10 are computed from the federal short-term rate based on daily compounding determined during January 2008.

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WASHINGTON — The Internal Revenue Service is encouraging business taxpayers, associations and other interested parties to submit to the Industry Issue Resolution (IIR) Program tax issues for resolution involving a controversy, a dispute or an unnecessary burden on taxpayers.

Though submissions can be made at anytime for consideration in the IIR program, submitted issues received by March 31, 2008, will be considered for acceptance in April.

The objective of the IIR program is to resolve business tax issues common to significant numbers of taxpayers through new and improved guidance. In past years, issues have been submitted by associations and others representing both small and large business taxpayers, resulting in tax guidance that has affected thousands of taxpayers.

Recent submissions accepted into the IIR program include:

• Integrated Public Utilities - regarding an optional method to be used by integrated utility companies in computing their qualified production activities income under IRC section 199(c). 
   
• Automobile Last In, First Out (LIFO) - for auto wholesalers, manufacturers and dealers regarding the proper treatment of the dollar-value, LIFO inventory method for pooling purposes of crossover vehicles, which have characteristics of trucks and cars.

Recent guidance issued as a result of the IIR program includes:

IR-2008-32 , March 3, 2008

WASHINGTON — The Internal Revenue Service announced that e-file is off to a fast start in 2008 with more than 38 million tax returns filed electronically so far.

The 2008 e-file level is up 5 percent from the 36 million returns filed for the same period last year, with double digit growth coming from taxpayers filing from their home computers.  

“E-filing continues to be the preferred way to file your tax return. It is the fast, easy, safe and more accurate way to file your tax return,” said IRS Acting Commissioner Linda E. Stiff. 

According to the new filing season statistics for the week ending Feb. 22, 2008, one of the biggest areas of growth is returns electronically filed from home computers. More than 12.3 million returns were filed from home, an increase of almost 14 percent from the same time last year.

Overall, 46.9 million tax returns have been filed so far in 2008, a 1.5 percent increase from the 46.2 million returns that had been filed at the same point in 2007.

As for the total amount of all refunds, $106.7 billion has been issued so far in 2008 with the average refund amount of $2,708, up two percent from the same time last year. So far this year, the IRS has directly deposited 33 million refunds out of the total of 39 million refunds. The direct deposit refunds were valued at just over $96 billion with the average amount of a direct deposit refund of $2,900. 

IR-2008-33, March 4, 2008 

WASHINGTON —The Internal Revenue Service announced today that it has automated the user fee calculations for taxpayers entering into an installment agreement. 

Previously, taxpayers were required to submit a paper Form 13844 to request a reduced user fee. Now, eligibility for reduced fees is determined automatically by the IRS. 

An installment agreement allows taxpayers to pay their full tax debt in smaller, more manageable amounts, though penalties and interest continue to accrue on the unpaid portion of that debt. Taxpayers are charged a one-time fee to set up an installment agreement with the IRS. A reduced fee is available for qualifying taxpayers.

Generally, user fees are $105 for non-direct debit agreements, $52 for direct debit agreements and $45 for reinstatements. However, the fee is only $43 for taxpayers with income at or below certain U.S. Department of Health and Human Services poverty guidelines.

All taxpayers entering into an installment agreement will automatically be considered for the reduced user fee using information the IRS already has on hand from the taxpayer’s current tax return. Those who qualify will be charged the reduced $43 fee for all installment agreements established through any method. These include the Online Payment Agreement application on the IRS Website at IRS.gov, telephone, face-to-face or mail. 

“This new process will improve service for and reduce the paperwork burden on taxpayers applying for an installment agreement,” said acting IRS Commissioner Linda E. Stiff. “Now, taxpayers who are eligible for the reduced fee will automatically receive it without extra work on their part.” 

Updated March 12, 2008 — see tax return mailing addresses under Related Items 

IR-2008-35, March 7, 2008

WASHINGTON — The Treasury Department and the Internal Revenue Service issued proposed regulations to clarify the treatment of expenditures incurred in selling, acquiring, producing or improving tangible assets.

These proposed regulations replace the regulations that were proposed by the Treasury Department and the IRS in August 2006, and take into account many of the comments received in response to the 2006 proposed regulations.

For many years, there has been controversy about how taxpayers characterize certain expenditures for tax purposes.  Expenditures that result in improvements must be capitalized and cannot be immediately deducted, but those that are necessary repair and maintenance expenses may be deducted immediately. There has been uncertainty on how to apply the tests used to determine when expenses may be deducted immediately and when expenses must be capitalized and depreciated over a certain number of years. 

Like the 2006 proposed regulations, these proposed regulations provide guidance on how to determine whether an expenditure must be capitalized as an improvement cost.  Specifically, these proposed regulations require capitalization of expenditures that result in a betterment or restoration of the property, and they describe the factors to be used in determining whether an expenditure results in a betterment or restoration. 

The proposed regulations also provide guidance concerning the appropriate unit of property to which the betterment and restoration rules should be applied.   All of these rules have been revised from the 2006 proposed regulations in response to the concerns raised by commentators.

IR-2008-36, March 7, 2008

WASHINGTON — Using the Industry Issue Resolution (IIR) program, the Internal Revenue Service today issued guidance regarding the proper pooling treatment of automobiles, light-duty trucks, and crossover vehicles which have characteristics of trucks and cars under the dollar-value, last-in, first out (LIFO) inventory method.

The Treasury Department and Internal Revenue Service recognize that the distinctions between cars and light-duty trucks have diminished significantly since the issue was last addressed in IRS guidance and by the Courts. To address these distinctions and in response to an IIR request submitted by Miller Chevalier Chartered and the National Auto Dealership Association (NADA), The Treasury Department and the Internal Revenue Service issued Revenue Procedure 2008-23. 

Effective for tax years ending on or after December 31, 2007, the revenue procedure provides a safe harbor pooling method, the Vehicle-Pool Method, for resellers of cars and light-duty trucks. (Light-duty trucks are trucks with a gross vehicle weight of 14,000 pounds or less.)

The Vehicle-Pool Method allows a reseller to establish a New Vehicle pool for inventories of new vehicles including new cars, new light-duty trucks, and new crossover vehicles including SUVs, minivans, and other similar vehicles and a Used Vehicle pool for inventories of used vehicles.

Revenue Procedure 2008-23 also provides the procedures for a reseller subject to the LIFO pooling requirements to obtain automatic consent to change to the Vehicle-Pool Method.   

Updated March 13, 2008 — revised Package 1040A-3 and new tax return mailing addresses links under Related Items

IR-2008-38, March 10, 2008
      
WASHINGTON — The National Taxpayer Advocate, Nina E. Olson, announced today that the Internal Revenue Service has awarded almost $9 million in matching grants to Low Income Taxpayer Clinics (LITCs) for the 2008 grant cycle (Jan. 1, 2008, through Dec. 31, 2008). 

LITCs are organizations independent from the IRS that provide low income taxpayers with representation in federal tax controversies with the IRS for free or for a nominal charge. The clinics also provide tax education and outreach for taxpayers who speak English as a second language.  IRS Publication 4134, Low Income Taxpayer Clinic List, provides information on clinics in your area and contains details about the languages each clinic serves in addition to English.

Through the LITC program, the IRS awards matching grants of up to $100,000 a year to qualifying organizations.  For the 2008 grant cycle, the IRS awarded LITC grants to 154 organizations representing all 50 states, plus the District of Columbia, Puerto Rico, and Guam.

Questions about the LITC Program can be addressed to the LITC Program Office at (202) 622-4711 (not a toll-free call) or by e-mail at LITCProgramOffice@irs.gov

A list of organizations awarded a matching grant for the 2008 grant cycle is available.

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