Congressional inaction on the tax front portends a real mess, come this year end’s “lame duck” session.
And it probably doesn’t matter who wins the election. As has become all too usual, the final weeks of 2012 promise to be a true nightmare for tax practitioners. And so notes the National Taxpayer Advocate (NTA) in her recently-released mid year report to Congress.
“The continual enactment of significant tax law and extender provisions late in the year has led to IRS delays in handling millions of taxpayers’ returns and caused many taxpayers to underclaim benefits because they did not know what the law was,” quoth the NTA, who further opines that the 2013 filing season is likely to create problems for IRS, not to mention taxpayers themselves if Congress doesn’t act soon on the many provisions that either have already, or soon will expire.
Congress may or may not extend, retroactive to January 1, 2012 many expired/expiring provisions, which include:
- the increase in the exemption amount for the AMT (the so-called “patch”)
- the deduction for state and local taxes
- the deduction for mortgage insurance premiums
- the provision which allows persons over 70-1/2 to make tax-free withdrawals from their IRAs for use in funding charitable contributions
And these pale in comparison to the impact of pending expiring provisions which include the “Bush tax cuts” of marginal tax rates, reduced tax rates on dividends and long-term capital gains, not to mention the estate and gift tax exemption of $5 million per person and favorable gift tax rates.