Thursday, February 14, 2013

Payroll tax changes result in $3 billion surplus in January

WASHINGTON | Tue Feb 12, 2013 2:44pm EST

(Reuters) - The budget posted a surprise surplus in January for the first time in five years, as the Treasury likely benefited from a windfall when payroll tax cuts expired.

The budget registered a $3 billion surplus, the first time there had been a surplus in January since 2008, Treasury Department data showed on Tuesday. Economists had been looking for a $2 billion gap. The surplus compared with a $27 billion deficit in January 2012.

It appeared the Treasury got a boost from the expiration of a payroll tax reduction on January 1 following the last-minute "fiscal cliff" deal. In its estimate last week, the Congressional Budget Office said the Treasury got an extra $9 billion in taxes from the expiry.

The January surplus means the government's cumulative deficit for the fiscal year, which starts in October, is $290 billion, 17 percent lower than the comparable first four months of fiscal 2012.

During fiscal 2012 which ended September 30, the budget deficit totaled $1.089 trillion.

Growth in receipts outpaced rising spending, narrowing the deficit. Receipts grew to $272 billion from $234 billion in the same month last year while outlays rose to $269 billion in January of this year from $262 billion in January 2012. So far in the first four months of fiscal 2013, receipts are $98 billion higher compared to the same period a year ago.

The extra fiscal space should leave the Treasury with plenty of room to stave off default after a debt-limit extension expires on May 19.

Congress on January 31 passed a measure that allows Treasury to borrow sufficiently to meet federal obligations until May 19, at which time another increase in the federal debt limit will be needed.

But even if no increase is granted, Treasury will be able to stave off a final day of reckoning until late July or early August by redeploying emergency cash management measures which allow it to claw back about $220 billion worth of borrowing capacity.

(Reporting by Anna Yukhananov; Editing by Andrea Ricci and James Dalgleish
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  1. Hi there! great stuff here, I'm glad that I drop by your page and found this very interesting. Thanks for posting. Hoping to read something like this in the future! Keep it up!

    Do you have problem with irs payroll tax? The IRS continues to use Enforced Collection when it comes to unpaid payroll taxes and payroll returns that haven’t been filed. Enforced Collection can include a levy on the assets of the business, including the accounts receivable, equipment, automobiles and bank accounts.

    The IRS can also close a business for non-payment of payroll taxes. If the business is closed or files for bankruptcy protection, the IRS will look to the owner of the business for collection of the penalties, interest, taxes and trust funds. In the case of a corporation or a partnership, the IRS will look to the person responsible for paying the payroll taxes to collect the trust funds. This is known as the Trust Fund Recovery Penalty.

    1. Now that's a mouthful! Thanks for the comment, Kaieza.

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