Even the IRS is frustrated…
Nina Olson, the National Tax Payer Advocate, is urging Congress to act sooner rather than later to resolve the many tax laws that either expired at the end of 2011 or are scheduled to expire throughout 2012. In her report dated June 30, 2012, entitled “Fiscal Year 2013 Objectives” (see the full 154-page report here http://www.taxpayeradvocate.irs.gov//userfiles/file/FY13ObjectivesReporttoCongress.pdf )Ms. Olson states that inaction by Congress is affecting taxpayers now and risking great uncertainty for the 2013 tax filing season.
Specifically, 60 tax provisions expired by the end of 2011 and 41 more are scheduled to expire during 2012. Among those that expired at the end of 2011: a patch keeping 27 million taxpayers out of AMT; a deduction for state and local sales taxes claimed by 11 million taxpayers; and the deduction for mortgage insurance premiums claimed by 4 million taxpayers. Those expiring at the end of 2012 are the “Bush-era” tax cuts which set lower marginal income tax rates and a higher estate tax exemption/lower estate tax rate as well as lower capital gains and dividend rates.
As long as Congress fails to act, taxpayers are unable to plan for their tax liability with any certainty. Ms. Olson believes that Congress is likely to extend many provisions and make them retroactive but the reality is Congress won’t take on any tax legislation until after the presidential election in November giving taxpayers little, if any, time to take action to insure they are filing proper and correct returns. The result of this inactivity will be delayed, or incorrect, tax filings requiring long term follow up and tracking. Uncertainty in the law makes it almost impossible for taxpayers to know the right thing to do.
For an overview of the tax provisions expiring in 2012 and temporary tax provisions and “extenders” with 2011 or 2012 expiration dates, see a full list compiled by the Congressional Research Service here http://www.fas.org/sgp/crs/misc/R42485.pdf . If you really want to know how confusing the future of tax legislation will be, see the Joint Committee on Taxation’s list of expiring tax provisions through 2020 here https://www.jct.gov/publications.html?func=startdown&id=3722