IRS UNDER CONTINUED BUDGET SCRUTINY

On July 19, the Senate Appropriations Subcommittee approved an annual budget for the IRS of $6.68 billion. This presents a good-news, bad-news scenario for the embattled tax collection agency. The good news is that this proposed appropriation was $300 million more than the House approved; the bad news is that it is still $460 million less than last year's IRS budget and $1.14 billion less than the President's request. IRS watchers are predicting layoffs for the IRS during the ensuing fiscal year.

The IRS's budget woes will undoubtedly begin to impact upon CPA practices. Tax system modernization could be "back-burnered." Taxpayer assistance could decline. The incentive for low-cost filing and payment alternatives will be heightened. IRS agent caseload could increase dramatically with a resultant increase in IRS response time. *

EFT RELIEF ANNOUNCED BY
THE IRS

Earlier this year, the IRS announced that businesses which had paid more than $50,000 of employment taxes in 1995 would be required to make their deposits electronically beginning January 1, 1997. This change encompasses significantly smaller businesses than had been the case previously.

On July 31, 1996 the IRS Commissioner announced that the estimated 1.2 million businesses affected by the change will have an extra six months to begin making their deposits. Technically, the requirement will still become effective January 1, 1997, but the IRS will not impose any penalties for failure to comply with the new requirement before July 1, 1997. *

Source: IR-96-34