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Employers added 372,000 new positions last month, the Bureau of Labor Statistics reported, with gains across a range of industries and private-sector employment recovering all of its pandemic losses. The unemployment rate, meanwhile, remained steady at 3.6 percent for a fourth straight month.

“The U.S. labor market is defying gravity,” said Becky Frankiewicz, chief commercial officer for the staffing firm Manpower Group. “Fears of a possible recession stoked by inflation and an aggressive Fed are eclipsed by the simple reality that employers can’t hire fast enough to meet demand.”

The strong job growth keeps pressure on the Fed to continue raising interest rates when it meets later this month. After years of keeping interest rates at or near zero, the central bank has so far hiked rates three times this year, by a total of 1.5 percentage points, in the hope of slowing the economy just enough to curb inflation, which is at 40-year highs, without pushing it into a deep recession.

Fears of a more serious slowdown in the world’s largest economy are rising, despite the impressive job gains. Consumer confidence has plunged to record lows, in part because inflation is so high, and the stock market has lost trillions of dollars worth of value this year. (The stock market was mixed on Friday.)

Recession-spotters have pointed to technology industry layoffs, falling commodity prices and real-time measures of economic performance that showed output shrinking as proof that the United States was mired in its second downturn in three years.

The Federal Reserve Bank of Atlanta, for instance, estimated that the economy shrank by 1.2 percent in the second quarter, which would technically put the United States in a recession by one common definition, since the first quarter also saw a contraction.

But the National Bureau of Economic Research, the nonprofit organization that is the official arbiter of recessions, considers a number of other factors, such as the unemployment rate, before proclaiming a downturn is underway.

“The labor market continues to tighten,” said Eric Winograd, director of developed market economic research for Alliance Bernstein in New York. “Unless or until that changes, the economy will not be in recession, no matter what GDP prints say.”

President Biden on Friday took credit for the rapid labor market turnaround, saying it was the result of widespread stimulus efforts to revive the economy. The recovery from the brief pandemic recession in early 2020 has been much faster than the recovery from the Great Recession after the 2008 financial crisis.

“Today, we learned that our private sector has recovered all of the jobs lost during the pandemic, and added jobs on top of that,” Biden said in a statement on Friday. “This has been the fastest and strongest jobs recovery in American history.”

U.S. employers are still eager to bring on new workers. Businesses continued to hire briskly in June, with some of the biggest jumps in professional and business services, which added 74,000 jobs, leisure and hospitality at 67,000 jobs and health care at 57,000 jobs.

Employers added 29,000 new factory jobs in June, bringing the total to 12.8 million, which means all of the nearly 1.4 million manufacturing jobs lost in the early months of the pandemic have been recovered. There were also notable gains in jobs producing durable goods, such as computers and motor vehicles, and in food manufacturing.

Overall, the economy is still down about 500,000 jobs from before the pandemic. Although private-sector employers have more than made up for pandemic losses, the government is still down 664,000 employees from early 2020.

“These are big, broadly distributed gains,” said Julia Pollak, a labor economist at Zip Recruiter. “There was continued strength in even the most capital-intensive and interest rate-sensitive sectors like manufacturing and construction, which suggests that the labor market is still vibrant and dynamic. It is not reacting too negatively to the return to more normal interest rates.”

What is a recession? We answered all your economy questions here.

Employment also rose across retail, transportation and warehousing, and education. Day-care centers added 11,000 workers, while nursing and residential care facilities hired 8,000 workers, promising developments that could help get more parents and caregivers back into the labor force.

“We saw strong gains in child care, which has an immediate impact on getting people back to work,” Labor Secretary Marty Walsh said in an interview. “If you have people who can’t go to work because they don’t have strong child care, and all of a sudden, centers start calling parents saying, ‘We have an opening, our wait list is moving,’ that’ll have an impact on getting people, especially more women, back to work because frankly, the jobs are available.”

In Ohio, spirits manufacturer Cleveland Whiskey recently hired two new employees, bringing its head count to 18. Despite rising costs and other economic challenges, chief executive Tom Lix says sales have largely held up so far this year.

“There has been a little bit of a flattening from last year, but consumer demand remains pretty strong,” he said. “There are a lot of factors we’re dealing with, inflation, supply shortages in terms of getting bottles and grains and everything else, but nothing obvious that says, ‘Oh my God, demand is down.’ It is still too early to tell which way things are going, but we’re keeping a very close eye on it.”

The share of people with jobs or actively looking for one fell slightly in June, to 62.2 percent of the labor force, from 62.3 percent the month before. But workers continue to reap the benefits of a tight labor market where there are nearly two open positions for every person seeking a job.

Around 4.3 million Americans quit or changed jobs in May, a sign that workers had the upper hand. Some are switching careers altogether, from hospitality to office work, for instance, in search of more consistent hours, higher wages and better working conditions.

Wages continued to rise in just about every sector, except for manufacturing and professional and business services, where they remained steady from the month before. Average hourly earnings rose 10 cents to $32.08 in June, though there are signs that growth is cooling. Overall wages are up 5.1 percent over the past year, though they have not kept pace with prices, which have increased 8.6 percent in the same period.

“Wage growth has been fairly strong, and the good news is that gains have been largest for lower-income workers,” said Liz Ann Sonders, managing director and chief investment strategist at Charles Schwab.

After nearly a decade working in restaurants, Annabel Sanderson, 29, recently took a job as a teller for a bank in New Hampshire. She went through three interviews and got an offer within a week of applying. The bank is paying her more she had asked for, amounting to a 50 percent raise, along with a hefty benefits package that includes pet insurance. She said she had grown tired of working in short-staffed restaurants.

“I didn’t expect to get a job within a week, especially since I don’t have any experience in banking,” she said. “I was shocked as heck. But it just shows you that there is still a real need for employees.”

Congress reacts to jobs report along partisan lines

House Majority Leader Steny H. Hoyer (D-Md.) said the June statistics showed a continuing trend of growth. He cited the American Rescue Plan, which aimed to help small businesses during the pandemic, and a bipartisan infrastructure spending bill, which invested over $100 billion in infrastructure, as key laws that helped to “reinvigorate our economy and help Americans get back to work.”

“It is imperative that the House and Senate agree on a final version of a bipartisan, bicameral innovation bill similar to the America COMPETES Act that the House passed in February,” Hoyer added. The bill proposed training programs for workers in the innovation, research and manufacturing sectors. He also said the Senate could soon pass a reconciliation bill that would lower costs.

Republicans, though, raised concerns over the continuing labor shortage. “Red flags abound in the June jobs report with the worker shortage persisting, layoffs rising, and employment shrinking two of last three months, fueling inflation, empty shelves, and hurting the economy,” said Rep. Kevin Brady (R-Texas), the top Republican on the House Ways and Means Committee, in a statement.

He added that rising inflation created extra burden on small businesses and families, because they “have been wiping out their savings just to keep up with rising prices in President Biden’s cruel economy punctuated by slow growth.”

Source: WP

by Larson Accounting

18 de May de 2022

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The IRS said Thursday that it destroyed approximately 30 million unprocessed information returns because its “antiquated technology” forced it to dispose of the paper documents and vowed to process all such information returns that it received in 2021 and 2022.

The IRS statement was in response to an audit report by the Treasury Inspector General for Tax Administration (TIGTA) that described the document destruction. In that report released Monday, TIGTA recommended that the IRS develop a systemwide strategy to increase electronic filing of tax returns and forms.

The AICPA in a statement Friday called the document destruction “concerning,” considering the IRS’s struggles to process returns timely for the past two years, and called upon the Service to provide further details. The AICPA also noted it has urged the IRS to implement specific recommendations for reducing its backlog more quickly and to provide relief to taxpayers.

“IRS management’s decision to destroy information return documents due to the processing backlog raised numerous questions regarding IRS’s decision-making and risk assessment process,” Ed Karl, CPA, CGMA, the AICPA’s vice president–Tax Policy & Advocacy, said in the statement.

In its audit report, TIGTA noted that paper filings of the documents, including of many that currently cannot be e-filed, impose higher processing costs for the government and deny taxpayers the benefits of e-filing, including convenience, security, and assured delivery. Processing paper filings also imposes logistical challenges, TIGTA reported, including storage and untimely processing.

The IRS’s inability to process backlogs of paper-filed tax returns that had built up during the COVID-19 pandemic contributed to its decision to destroy about 30 million paper-filed information return documents in March 2021, TIGTA reported.

TIGTA also had reported the forms’ destruction in a September 2021 audit report, Effects of the COVID-19 Pandemic on Business Tax Return Processing Operations. In that report, TIGTA said it learned of the incident in its “walkthroughs” of the Service’s Ogden, Utah, processing center, and related some details of its discussion about it with IRS managers.

Information returns are furnished to taxpayers and filed with the IRS, usually reporting income or another tax item that taxpayers then report on an income tax return or retain in their records to support tax return entries. Examples include Form 1099-MISC, Miscellaneous Information.

However, taxpayers in some cases fail to include the reported income or item or do not report it properly. To enforce the proper inclusion of reported items, the IRS conducts what it calls post-processing compliance matches. First, the information returns are scanned into the IRS’s computer systems and then matched against the returns of taxpayers with respect to whom they were filed. One such IRS matching program is its Automated Underreporter Program.

TIGTA reported that when asked about the destruction of the information returns, IRS managers said that the system used to process the returns had to be taken offline to program updates for the next filing season.

In its statement Thursday, the IRS reiterated that rationale, saying the destroyed returns were a small fraction of the 3.2 billion information returns processed in 2020, and most were in the Form 1099 series. All but 1% of those 3.2 billion forms were “matched to corresponding tax returns and processed,” the IRS stated. The remaining 1% were destroyed “due to a software limitation and to make room for new documents relevant to the pending 2021 filing season.”

The IRS also stated that taxpayers and the payers of income that filed the forms have not been subject to penalties resulting from the destruction, and that there were “no negative taxpayer consequences.”

“Broadly, this situation reflects the significant issues posed by antiquated IRS technology,” the IRS stated, adding that in 2020, the Service placed a higher priority on processing tax returns, also backlogged, to issue taxpayer refunds amid the pandemic.

The AICPA’s Karl noted that the AICPA had urged additional taxpayer relief measures during the pandemic, including from penalties.

“We are encouraged that the IRS statement indicated that taxpayers and payors have and will not be subject to penalties,” Karl stated. “However, the AICPA believes that the IRS should be transparent with their remediation strategy to ensure that taxpayers who attempt to be in compliance, and payors who have been compliant with the information reporting requirements, do not have penalties imposed on them in the future.”

The September 2021 TIGTA report identified the higher-priority returns specifically as those in the Form 941 series, on which employers report payroll taxes. Many such returns in 2021 included claims for the employee retention credit.

TIGTA also identified SCRIPS (Service Center Recognition Image Processing System) as the affected system. SCRIPS, according to Internal Revenue Manual (IRM) Section 3.41.269.1 and IRS News Release 93-20, uses imaging and character recognition and is the IRS’s primary means of converting paper information returns into data in a dedicated database. Paper returns are scanned as they are received, but the IRM describes instances in which they cannot be scanned and must be manually processed.

System constraints require the IRS to process the paper information returns by the end of the calendar year in which they were received, the IRS said Thursday, meaning that those received in 2020 could no longer be processed after the 2021 filing season began. The Service also noted that taxpayers received a copy of the destroyed information returns, which they could have used in filing an accurate return.

The decision involved discussions within the IRS’s Wage and Investment and Small Business/Self-Employed (SB/SE) divisions, according to the earlier TIGTA report. The difficulty of retrieving the paper forms was one factor in deciding to destroy them. SB/SE managers conducted a risk assessment to assess what effect the documents’ destruction would have on its post-processing compliance activities.

But details about that risk assessment have not been divulged, as Karl noted in the statement.

“The IRS’s recent statement provided some of the answers, but American taxpayers deserve to know why this decision was made and how it might impact them,” Karl said. “The IRS should continue to operate with transparency on this issue.”

Despite the reasons the IRS had for destroying the information returns, the Service said Thursday it will not do so again in the foreseeable future.

“The IRS is planning to process all paper information returns received in 2021 and 2022,” the statement said.

It was not clear how that statement could apply to information returns received in 2021, given what the IRS said was its inability due to programming constraints to process information returns received in one year after the next year’s filing season begins.

Nor was it immediately clear how many taxpayers may have failed to properly include the reported tax items on the destroyed information returns, or if the IRS has any means or plan to identify those taxpayers and amounts.

Source: The Tax Adviser