The rate at which federal employees who use their own cars for work could go up by two cents in January, if GSA continues its pattern of following the Internal Revenue Service's rates.

The IRS announced Tuesday that beginning on Jan. 1, 2008, the standard rate used to calculate the deductible costs of operating an automobile for business purposes will be increased to 50.5 cents per mile, the highest rate ever. The current rate, set at the beginning of 2007, is 48.5 cents per mile.

As we reported last week, the President is intent on a raise averaging 3 percent and the Sandbox-kids are pushing 3.5 percent. Nothing new here. It’s the same shell game they play very year.

Since Congress is still mulling over the budget for the fiscal year that started on October 1st, the final decision from Congress on how much pay will be given to active duty federal employees in 2008 won't be known for days/weeks/months, who knows.

The House and Senate returned yesterday after an extended Thanksgiving Holiday break . This latest legislative time out followed their extensive summer break, which was preceded by a spring break and is just before their extended Christmas break that starts in a couple of weeks and will run until next year.

All these time off means that Congress has only a couple of weeks to work.. Congress has a lot of work to do and not much time to do it. Unfinished business includes passing 11 appropriations bills to run the government. Congress has cleared, and the president has signed, only one. That's a Defense appropriations bill. This is roughly the same situation as last year when Republicans controlled the House and Senate. Now, even with the Democrats in charge, the government continues to run on fumes (aka a continuing resolution that funds most agencies at levels set last year).

So, if the President has recommended a lower pay increase for 2008, it must be time for House Majority Leader Steny Hoyer (D-MD) to come out with a strong statement decrying the action and promising that Congress is willing to spend more money on Fed-Folks than the President. Right? Must be as he issued a press release moments after the news was announced on the Presidents 2 3 percent raise figure.

The bottom line: The pay raise scenario is playing out as it usually does. Anything can still happen with regard to your pay raise depending on the ebb and flow of the on-going campaign for next year's national elections. But an average raise of 3.5% being approved when all is said and done is a pretty good bet. Of course, when the appropriations bills will be approved is a tougher question. Don't spend the money yet--it may take awhile for the politicians to get tired of issuing press releases and get around to coming back to work and getting the job done. My guess, not until after the 1st of the year.

But we thought you might like a hint on what the numbers will actually look like. The numbers for either the 3 percent the Grinch is proposing or the 3.5 percent that the Sandbox-kids are pushing are:

Let's face it, even in the nations capitol, the difference between the two proposals doesn’t get you a cup at Starbucks each morning.   And, in the "rest of the U.S., it might get you a pickup trucks fuel tank filled a bit more than once.

Many folks are counting on an early tax refund to pay for a Christmas full of gifts for family and friends. Now, because the Sand box kids have dawdled and bickered all year on a tax bill, millions of early filers could have to wait extra weeks for refunds that last year averaged $2,291. Worse, many expecting a refund could end up instead with a tax bill.

News is now emerging that the Internal Revenue Service is looking hard at delaying the start of its filing season, set to kick off on Jan. 14, if Congress fails to pass legislation in the next two weeks. At issue is how to handle what could be a dramatic increase in the number of people facing a higher alternative minimum tax (AMT).

If there is a delay and it extends into mid-February, it will slow nearly 38 million refunds worth a total of about $87 billion, the IRS Oversight Board predicted.  The board, an independent advisory group, said in a report to lawmakers last week that it is "gravely concerned about the serious risks" to the filing season if Congress does not make timely changes to the tax. They include more mistakes by both taxpayers and the IRS and more people failing to pay taxes because of uncertainty about what they owe.

The alternative minimum tax was passed in 1969 and was aimed at about 155 very wealthy families who used deductions to avoid paying any federal income tax. The AMT disallows certain deductions and credits. It was not adjusted for inflation; as a result, over the years it has hit a growing number of middle-income taxpayers estimated at more than 4 million in the 2006 tax year.

Richard Spires, the deputy IRS commissioner for operations support, said in an interview that the agency is considering not processing all early returns if the AMT issue is not resolved soon.

"We are worried that if we allow certain filers to file that it does not cause a lot of confusion and delay the whole filing system for everyone," he said.

While most people are not hit by the tax, the IRS lacks a way to distinguish what returns are affected by possible changes in tax law.

The AMT, he said, involves "some of the most complex code that we deal with, right at the heart of our tax compilations."

People who file returns under the current AMT law would have to file an amended return if the law were changed. Spires also stressed that there would not be any advantage to filing by paper if the IRS is not accepting electronic returns. "We're not going to process paper returns any faster," he said.

Some disruption already is taking place. As Congress was leaving for its Thanksgiving break with no deal in sight, the IRS was going to press with the forms for the 2007 tax year.

Spires said the agency has postponed printing the AMT form and 11 others affecting smaller tax issues that Congress has promised but failed to deal with.

Congress returns this week. But if history is any indicator they will probably come back, issue a few poisonous press releases finger pointing at each other, and recess for Christmas. Even if they should do something, it will take about seven weeks after a bill is passed and signed into law to do the necessary programming and testing before those forms could be presented to the public, Spires said.

The IRS oversight board, using past agency data, said that if the start of the filing season is pushed back two weeks to Jan. 28, it would delay some 6.7 million refunds totaling $17 billion. A Feb. 18 starting date would delay 37.7 million refunds totaling $87 billion.

The report came after weeks of warnings — from President Bush, Treasury Secretary Henry Paulson and the IRS about the consequences of failing to enact a temporary fix.   Paulson said the 25 million returns that could be affected in 2007 would pay on average an additional $2,000 in federal income tax.

On Nov. 9, House Democrats pushed through a one-year "patch" to shield 21 million taxpayers from about $50 billion in higher taxes due to the AMT.

Problem is that the bill included an additional $30 billion in new giveaways. But, honoring their pledge not to pass legislation that adds to the federal deficit, Democrats voted to increase taxes by $80 billion in other areas. Tax-adverse Republicans voted unanimously against the bill and Bush said he would veto any bill that included a tax increase.

Congress' Joint Committee on Taxation estimates that, without a fix, about half of taxpayers with adjusted gross incomes in the $75,000-$100,000 range will be affected by the AMT this year.
 

In 2001, President Bush gave federal employees an extra holiday by excusing them from duty Dec. 24, the Monday before the official Christmas holiday.

Asked if the president would deliver a holiday present this year, as Dec. 24 falls on a Monday, administration officials declined to comment.

However, perhaps a hint, one official noted that the 2001 holiday was granted in recognition of the extra hours put in by many federal employees after the terrorist attacks on Sept. 11.