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USA
20th May 2022
 
TAX
House subcommittee queries audit rates, IRS resources
Causes and cures for persistent high rates of improper payments of the earned income tax credit (EITC) and consequent high audit rates by the IRS of taxpayers claiming the credit were among topics discussed Wednesday by members of the Oversight Subcommittee of the House Ways & Means Committee. The session, "On Taxpayer Fairness Across the IRS," drew upon a report released Tuesday by the U.S. Government Accountability Office (GAO) that was compiled at the request of the subcommittee's chair, Rep. Bill Pascrell (D-NJ). At the outset of the hearing, Mr. Pascrell decried what he called "one tax system for the wealthy and another for everyone else," stating that the IRS's enforcement is experienced by billionaires in a "vastly different" mode than by the "average American." Claimants of the Earned Income Tax Credit (EITC) are much more likely to be audited than other taxpayers, Mr. Pascrell said. The GAO report found that the audit rate for EITC taxpayers is 0.77%, roughly three times the average for all taxpayers of 0.25%. IRS administrative shortcomings also adversely affect all taxpayers, Mr. Pascrell said. These include backlogs of returns in the tens of millions, erroneous notices to taxpayers, and unanswered taxpayer phone calls, he said. Ranking member Rep. Tom Rice (R-SC) likewise lamented slow processing times and spotty phone customer service, while praising the "heroic" efforts of IRS employees to administer COVID-19 tax relief measures such as economic impact payments (EIPs) amid the pandemic's impediments to the agency's own operations. Mr. Rice noted that this was the seventh time the subcommittee has examined the EITC, and he urged fellow legislators to "move beyond talking points" to better understand the reasons for an approximately 25% rate of improper payments of the credit annually, involving an estimated $19bn in the most recent tax year for which data is available
Michigan Governor and Legislature float tax cuts
Michigan Gov. Gretchen Whitmer and the Republican-led Legislature proposed new plans to cut taxes Thursday, but remained at odds over the scope and immediacy of any relief. Ms. Whitmer called for a one-time $500 election-year rebate for “working families,” adding to her earlier proposals to gradually repeal a tax on retirement income and fully restore a credit for lower-wage earners. GOP lawmakers in turn quickly passed sweeping $2.6bn legislation that would permanently reduce the state income tax in 2023, increase the personal exemption, raise it for seniors, create a child tax credit, fully reinstate the credit for low-income workers, and revise and expand a break for disabled veterans. Ms. Whitmer vetoed a plan that included some identical or similar provisions two months ago, saying it would have reduced funding too much and put key government functions at risk. Another veto is likely.
INDUSTRY
Tax season wasn’t as bad as some expected, survey finds
Tax preparers found that this year's filing season went smoother than they had expected, according to a survey from the National Association of Tax Professionals. Respondents’ most critical issues for the season were inaccurate reporting of economic payments and advanced Child Tax Credit payments, not receiving client documents in a timely manner, incomplete documents and less-effective client communications.  Before tax season, only 13% of respondents thought this year would be better than tax season 2021. The post-season survey found that 24% of members felt the 2022 filing season ran more smoothly than the 2021 season. Respondents plan to combat next tax season by focusing on client management, encouraging early submission of documents, stressing the importance of receiving all documents needed, educating clients, and evaluating their client base and workload, the NATP added.
FIRMS
KPMG Canada lets workers 'roam' for two months
KPMG Canada is introducing a remote work and travel program that will allow partners and employees to work outside their home province for up to eight weeks – including up to four weeks outside Canada. All eligible staff will be able to participate in the KPMG Roam program regardless of seniority. “In creating this program, we were guided by the knowledge that our people can work effectively in many locations while supporting our clients, and that providing opportunities for unique and meaningful experiences helps us all thrive,” said Louise Lutgens, managing director of talent innovation and strategic investments at KPMG Canada. The program follows KPMG’s announcement in February that it would give its employees an extra seven paid days off in July and August, making every weekend a long weekend in those months.
ECONOMY
Weekly jobless claims rise for third straight week
New applications for unemployment benefits rose for the third week in a row, amid separate signs that the U.S. labor market remains unusually tight. Initial jobless claims, a proxy for layoffs, increased by 21,000 to a seasonally adjusted 218,000 last week from the previous week’s revised level of 197,000, the Labor Department said Thursday. Despite the recent rise, claims remain historically low with last week’s figure matching the 2019 average ahead of the COVID-19 pandemic. The four-week average for claims, which smooths out volatility in the weekly figures, rose to 199,500 from the previous week’s revised 191,250, the Labor Department said Thursday. The four-week average reached 170,500 last month, its lowest point on records dating back to 1967. Continuing claims, a proxy for the total number of people receiving payments from state unemployment programs, declined to 1.3m for the week ended May 7th from the previous week’s level—the lowest level since December 1969.  “With labor shortages still a persistent problem, we don’t expect layoffs will be widespread, although job losses in the tech sector appear to be increasing,” said lead U.S. economist Nancy Vanden Houten at Oxford Economics. ”Recent layoff announcement merit watching for a shift in business hiring decisions,” said Rubeela Farooqi, chief U.S. economist at High Frequency Economics.
U.S. home prices hit new record in April
U.S. home prices climbed to a record of $391,200 in April, but the number of sales fell as high prices and rising interest rates pushed more buyers out of the market. Existing-home sales fell 2.4% in April from the prior month to a seasonally adjusted annual rate of 5.61 million, the weakest rate since June 2020, the National Association of Realtors (NAR) said Thursday. April sales fell 5.9% from a year earlier. The median existing-home price rose 14.8% from a year earlier, with $391,200 a record high in data going back to 1999. There were 1.03m homes for sale at the end of April, up 10.8% from March and down 10.4% from April 2021, NAR said. At the current sales pace, there was a 2.2-month supply of homes on the market at the end of the month.
CORPORATE
Billionaire’s fortune tumbles after SPAC venture
Denis Sverdlov, the founder of electric-vehicle maker Arrival, who was worth $11.7bn a year ago, lost his billionaire status last month as shares of the company plunged after combining with a special purpose acquisition company (SPAC). His 94% decline in net worth is the largest wealth loss of anyone outside China who appeared on last year’s Bloomberg Billionaires Index. Bloomberg’s Scott Carpenter observes that “Sverdlov’s collapse is a cautionary tale of how SPACs - a financial maneuver that boomed in recent years - can go from a means of wealth creation into one of destruction.”
PERSONAL FINANCE
Hybrid work is as important as financial benefits, study says
A poll of 2,000 office workers by flexible office provider IWG suggests hybrid working is as important as other financial benefits such as health insurance, and is beginning to gain parity with salary, pension and holiday as key factors when seeking employment. Half of those surveyed said they were not interested in jobs that did not offer some form of hybrid working. Meanwhile, a survey of 6,500 workers in 10 countries found that fewer than a fifth have returned to offices full-time. Those who have returned are typically back in for one or two days a week, according to technology firm Citrix. "Employees have seen the positive impact flexible work can have on everything from engagement and productivity to work-life balance, mental health and the environment," said Mark Sweeney of Citrix.
OTHER
Companies plan to hire more interns
U.S. companies are forecast to have 22.6% more interns during the 2021-22 academic year than the year prior. The projection is a reversal from 2020-21, when employers reduced their intern headcount by 0.5%, according to a recent report from the National Association of Colleges and Employers (NACE), which collected data from more than 200 Fortune 1,000 companies between November and January. As the battle for talent heats up, companies are trying to get a leg up against their competitors by hiring more interns to boost their entry-level pipelines. “The bulk of our employers state that recruiting is the main purpose of their internship programs,” said Joshua Kahn, assistant director of research and public policy for NACE. Employers in the finance and tech sectors have some of the highest rates of converting internships to full-time jobs at 56%, compared to 52% overall.

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