Forget the coming fiscal cliff; how will you file your 2012 income tax return? The uncertainty in Washington on taxes is already having an effect on tax return filing season for 2012 income tax in the USA.
Tax rates for 2013 are up in the air, but even worse, there are several provisions that are still uncertain for 2012.
The IRS has not yet released key forms, schedules, or instructions (with official tax brackets) for 2012.
The IRS won't be able to release many of the forms and instructions until these uncertainties are resolved.
The release process generally takes at least 2 weeks within the IRS, and another 2-3 weeks for tax software firms to get their programs updated.
Acting IRS Commissioner Steve Miller, speaking at the GWU-IRS Institute on International Tax on December 6, said that if Congress did not "act soon, filing season may be delayed.
" We are now at the point that delay is almost certain, as the tax law for 2012 is still not final.
The problem areas for 2012 are those provisions that have expired but that most people in Washington view as likely to be extended by Congress and approved by the President.
These include extending eligibility for or amounts of: > AMT exemption amounts for individuals and corporations > Individual provisions: - College tuition deduction - State and local sales tax deduction - Teachers' classroom expense deduction - Qualified charitable distributions from IRAs > Business provisions: - Research credit (and corresponding reduction of deductions) - Limits on first year expensing of depreciable property - Work opportunity credit - 15 year depreciation for certain retail and restaurant property - New Markets credit - Credit for energy efficient homes Each of the above is discussed in Income Tax in the USA, ASIN: B007N7JE64.
While the above may have no effect on you personally, they affect lots of taxpayers.
First year expensing, in particular, could affect a large portion of business entities as well as individuals who operate a business directly or through a partnership or S Corporation.
AMT affects millions of taxpayers.
What This Means To You It appears unlikely to be possible to e-file income tax returns before February 1, possibly later, because software may not be ready.
Key forms are unlikely to be available even for download before mid to late January.
Form 1040 and some of its schedules are available now, but the instructions and other schedules are not.
Most corporate and partnership forms have not yet been released.
To hedge its bets, IRS has released some forms, such as Form 1040 Schedule A, with some lines and boxes marked "Reserved.
" Everything about income tax in 2013 is still undecided.
Several key provisions, like the lower tax rate for qualified dividends, are scheduled to expire after 2012.
Congress itself is nowhere near consensus even on what tax rates should be.
Given the political climate in Washington, it seems unlikely that the 2012 and 2013 uncertainties will be resolved before December 31.
If Congress and the President agree on a tax package well after year end that impacts 2012, then any forms released by the IRS may be instantly obsolete.
If that happens, tax return filings for everyone may be seriously delayed.
In addition, companies preparing financial statements under U.
S.
GAAP may face another problem.
Under ASC 740, part of GAAP, companies must compute a provision (expense) for income tax.
That provision must be based on enacted law as of the date of the balance sheet.
If a company would benefit from a provision (such as the research credit or reduced tax rate) that has not been extended by the company's balance sheet date, it cannot take the benefit on its financial statements.
To learn more, read Chapter 49 of Income Tax in the USA, ASIN: B007N7JE64.
What You Should Do You should prepare for filing your 2012 return as much as possible even before forms and instructions are released.
Get your books and records in order, collect W-2s, 1099s, and other information.
For businesses, also be prepared to make adjustments for possible extension of expiring provisions.
Be prepared for possible income tax expense if the provisions are not extended.
Plan your tax provision procedures accordingly.
Get competent advice.
Tax rates for 2013 are up in the air, but even worse, there are several provisions that are still uncertain for 2012.
The IRS has not yet released key forms, schedules, or instructions (with official tax brackets) for 2012.
The IRS won't be able to release many of the forms and instructions until these uncertainties are resolved.
The release process generally takes at least 2 weeks within the IRS, and another 2-3 weeks for tax software firms to get their programs updated.
Acting IRS Commissioner Steve Miller, speaking at the GWU-IRS Institute on International Tax on December 6, said that if Congress did not "act soon, filing season may be delayed.
" We are now at the point that delay is almost certain, as the tax law for 2012 is still not final.
The problem areas for 2012 are those provisions that have expired but that most people in Washington view as likely to be extended by Congress and approved by the President.
These include extending eligibility for or amounts of: > AMT exemption amounts for individuals and corporations > Individual provisions: - College tuition deduction - State and local sales tax deduction - Teachers' classroom expense deduction - Qualified charitable distributions from IRAs > Business provisions: - Research credit (and corresponding reduction of deductions) - Limits on first year expensing of depreciable property - Work opportunity credit - 15 year depreciation for certain retail and restaurant property - New Markets credit - Credit for energy efficient homes Each of the above is discussed in Income Tax in the USA, ASIN: B007N7JE64.
While the above may have no effect on you personally, they affect lots of taxpayers.
First year expensing, in particular, could affect a large portion of business entities as well as individuals who operate a business directly or through a partnership or S Corporation.
AMT affects millions of taxpayers.
What This Means To You It appears unlikely to be possible to e-file income tax returns before February 1, possibly later, because software may not be ready.
Key forms are unlikely to be available even for download before mid to late January.
Form 1040 and some of its schedules are available now, but the instructions and other schedules are not.
Most corporate and partnership forms have not yet been released.
To hedge its bets, IRS has released some forms, such as Form 1040 Schedule A, with some lines and boxes marked "Reserved.
" Everything about income tax in 2013 is still undecided.
Several key provisions, like the lower tax rate for qualified dividends, are scheduled to expire after 2012.
Congress itself is nowhere near consensus even on what tax rates should be.
Given the political climate in Washington, it seems unlikely that the 2012 and 2013 uncertainties will be resolved before December 31.
If Congress and the President agree on a tax package well after year end that impacts 2012, then any forms released by the IRS may be instantly obsolete.
If that happens, tax return filings for everyone may be seriously delayed.
In addition, companies preparing financial statements under U.
S.
GAAP may face another problem.
Under ASC 740, part of GAAP, companies must compute a provision (expense) for income tax.
That provision must be based on enacted law as of the date of the balance sheet.
If a company would benefit from a provision (such as the research credit or reduced tax rate) that has not been extended by the company's balance sheet date, it cannot take the benefit on its financial statements.
To learn more, read Chapter 49 of Income Tax in the USA, ASIN: B007N7JE64.
What You Should Do You should prepare for filing your 2012 return as much as possible even before forms and instructions are released.
Get your books and records in order, collect W-2s, 1099s, and other information.
For businesses, also be prepared to make adjustments for possible extension of expiring provisions.
Be prepared for possible income tax expense if the provisions are not extended.
Plan your tax provision procedures accordingly.
Get competent advice.