Positive Impact of Increased IRS Funding
The recent influx of cash that Congress allocated to the IRS is unexpectedly having a positive effect. Here are the key takeaways:
Improved Tax Return Processing
The IRS is using the funding increase to catch up on processing both new and backlogged tax returns. This is providing policymakers with a clearer picture of the X-date, which is the point when the Treasury will run out of money if the government can't take on more debt.
Approaching a Potential Default
The nation is approaching a potential default, which could severely impact the global economy, due to its limit for borrowing. However, Congress and the White House have not been able to agree on a plan to lift or suspend the borrowing limit.
Triggering the X-date
As the Treasury is using "extraordinary measures" to prevent the US from running out of cash, the X-date is triggered when the accounting workarounds are exhausted.
Better Understanding of Financial Position
The latest IRS data is helping experts understand the nation's financial position, as it offers a better picture of what receipts will be. This is a sharp contrast to previous years, during which the agency was underfunded and backlogged.
Warnings from the Treasury Secretary
Janet Yellen, the Treasury Secretary, has warned that the US could default on its debt as early as June 1 if lawmakers do not increase or suspend the nation's borrowing authority.
Refining the X-date Estimate
As the IRS is processing tax returns more quickly than it did last year, the Congressional Budget Office (CBO)has been able to pinpoint a more precise X-date. However, the X-date is typically a time range rather than a specific date, as it reflects the money that goes both in and out of the government.
Uncertainty Surrounding the X-date
While the latest IRS data is invaluable for understanding the nation's financial position during the debt ceiling debate, experts say that there is still uncertainty surrounding the precise X-date. The CBO, Moody's Analytics, and the Bipartisan Policy Center are all trying to estimate the time frame for a potential default, but even their leaders admit that nobody knows exactly when the X-date could arrive.
Estimates and Presidential Talks
Mark Zandi, the chief economist of Moody's Analytics, has estimated that the X-date will fall around June 8. As the nation edges closer to a potential default, experts say that forecasts of the X-date become more accurate, which has prompted President Joe Biden to invite the top four congressional leaders to the White House for talks.
National Security Concerns
Experts warn that the debt ceiling brinkmanship is a national security issue, especially as China, a major creditor holding US debt, becomes more adversarial towards the US.
Compliance and Guidance
Tax laws are constantly evolving, and at the office of David M. Garvin, we stay updated on the latest developments. With the increased budget, the IRS reviews more tax returns quicker than in past years. The result has been more returns being reviewed and more taxpayers being audited.
If you have IRS audit issues, contact a qualified tax attorney to protect your rights. Our law firm has a great deal of experience handling tax matters and audits. The firm has concentrated on tax defense for over 40 years. Our results speak for themselves. Feel free to contact us today.