Volume 29 Number 1, Winter 2008

• Congress Passes AMT Patch, Mortgage Relief and More in Eleventh Hour Blitz
   
• Procedures for Employers Who Receive No-Match Letters
   
• Cell Phone Laws Vary by Area
   
• Rates and Dates
   
• The Better Way
   
• 2008 Standard Mileage Rates Set
  

Congress Passes AMT Patch, Mortgage Relief and More in Eleventh Hour Blitz

Just in time for the start of the 2008 filing season, Congress passed an AMT patch, which preserves an exclusion that will keep almost 25 million middle-income taxpayers out of the reach of the AMT retroactively for one more year -- 2007. It also passed mortgage tax relief, an energy bill with several tax provisions, special tax breaks for victims of the Virginia Tech tragedy, increased funding for the IRS, and an important technical corrections bill to end the year.

Congress, however, failed to pass a package of extenders for certain tax breaks to carry over into 2008. It may do so retroactively to January 1, 2008, sometime during the first half of the new year. A farm bill, with farm-related tax incentives, also stalled at the last minute as did tax relief for America's military personnel. And a long-list of revenue raising provisions that threaten tax increases for certain taxpayers await being considered when Congress reconvenes.

Here a run down of the major tax laws that were passed and became law in December:

The AMT Patch. On December 19, the House passed and sent to the President the Tax Increase Prevention Act of 2007. The legislation increases AMT exemption amounts for 2007 to $44,350 for single taxpayers and $66,250 for joint filers. The legislation also extends through 2007 the provision allowing most nonrefundable tax credits for AMT purposes.

Mortgage Debt Relief. In December the House passed by unanimous consent the Senate version of the Mortgage Forgiveness Debt Relief Act of 2007. The legislation includes a three-year mortgage debt forgiveness exclusion of up to $2 million in debt on a principal residence, retroactive to January 1, 2007. The legislation also extends the mortgage insurance premium deduction for three years, includes an exclusion for benefits to volunteer fire-fighters and emergency medical responders, extends the joint return sale of principal residence exclusion to certain post-marriage sales by surviving spouses, clarifies student housing eligible for the low-income housing credit, and provides alternative tests for qualifying as a cooperative housing corporation.

The Energy Act. On December 18, the House passed and sent to the President, by a vote of 314 to 100, the Energy Independence and Security Act of 2007, as passed by the Senate. Included in the legislation are two Tax Code provisions relating to the extension of the additional 0.2 percent FUTA surtax and seven-year amortization of geological and geophysical expenditures for certain major integrated oil companies.

IRS Funding. On December 19, Congress also passed the Consolidated Appropriations Act 2008. It gives the IRS more money for enforcement efforts. $10.9 billion is allocated for the IRS, a $300 million increase over the FY 2007 IRS budget. The IRS budget includes $4.8 billion for enforcement activities, $2.2 billion for taxpayer services, and $3.7 billion for operations support for enforcement, taxpayer service, and other IRS functions. It also contains $267 million for business systems modernization and $177 million for the Taxpayer Advocate Service.

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Procedures for Employers Who Receive No-Match Letters

The Department of Homeland Security (DHS) is amending the regulations relating to the unlawful hiring or continued employment of unauthorized workers. DHS released an Immigration and Customs Enforcement (ICE) Final Rule on “No-Match” regulation, “Safe Harbor Procedures for Employers Who Receive a No-Match Letter.”

The final rule describes an employer’s current obligations under immigration laws, and its options for avoiding liability after receiving a letter from the Social Security Administration (SSA), commonly referred to as an employer “no-match letter”, or a letter from ICE called a “Notice of Suspect Documents”, after it has inspected an employer’s Employment Eligibility Verification forms (Forms I-9) during an investigation audit.

In relation to no-match letters from SSA, the employer must check its records to determine whether the discrepancy was caused by a clerical error, correct the error with SSA, and verify that the corrected name and social security number now match SSA’s records. The rule advises employers to retain a record of the manner, date, and time of such verification. The employer may update the I-9 form relating to the employee or complete a new I-9 (retaining the original), but should not perform a new I-9 verification.

If the employer determines that the SSA no-match is not a result of an error in the employer’s records, the employer must promptly request the employee confirm that the name and social security account number in the employer’s records are correct.
In relation to a notice of discrepancy from DHS, the employer must contact the local DHS office in accordance with the written notice’s instructions and attempt to resolve the questions raised by DHS about the immigration status document or employment authorization document. Note that the specific instructions in the notice may provide less than 30 days for the employer to respond.

If the discrepancy cannot be resolved with either SSA or DHS within 90 days of receipt of the written communication from either agency, the employer must attempt to reverify the worker’s employment eligibility by completing a new I-9 employment verification form. Companies should use the same procedures as when completing an I-9 form at the time of hire, with a few exceptions:

d The employee must complete section one and the employer must complete section two of the new I-9 form within 93 days of receipt of the notice from either SSA or DHS.

d The employer cannot accept any document referenced in the DHS notification or any document that contains a social security number that is the subject of the SSA no-match letter to establish employment authorization or identity.

d The employee must present a document that contains a photograph in order to establish identity or both identity and employment authorization.

d The new I-9 form should be retained with the original I-9 form(s).

If the employer cannot verify the employee’s work eligibility through completion of a new I-9 form, the employer must decide whether to terminate the employee, or face the risk in any subsequent DHS enforcement action of being determined to have constructive knowledge and being penalized for the continuing employment of an unauthorized worker.

DHS takes the position that applying the safe-harbor rule in a uniform manner for all employees whose account numbers or work authorization documents are challenged by the SSA or DHS should not subject an employer to liability for document abuse and/or unlawful discrimination on the basis of national origin and citizenship status.