The upcoming tax filing season will be an adventure, in part because of expired tax provisions that have yet to be renewed.
Many of these provisions, often referred to as tax extenders, expired on Dec. 31, 2013. The entire tax-preparing world, personal and professional, has been waiting, and waiting, and … waiting, to learn which, if any, will be renewed for the purpose of tax preparation for the 2014 tax year filing.
As we approach year-end, the extenders — many of them significant — remain in limboland.
A few examples are:
- a 50 percent bonus depreciation on eligible property;
- a tax credit for research and development;
- home and appliance energy-efficiency credits;
- an above-the-line deduction of up to $4,000 for higher education expenses;
- the Work Opportunity Credit;
- a deduction for qualified educator expenses;
- a discharge of indebtedness on principal residence debt;
- home mortgage insurance premium deductions;
- deductions for state and local general sales taxes;
- qualified restaurant buildings and improvements and qualified retail improvements;
- expanded expensing under Section 179;
- a deduction for energy-efficient commercial buildings; and
- tax-free distributions from qualified retirement plans for charitable purposes.
As Forbes reported on Nov. 18:
"Families and small businesses expecting refunds need Congress to enact something before year-end so they can file their tax returns for 2014 in early January. Publicly traded businesses would like to report lower effective tax rates for 2014. And the IRS would like to get its forms, instructions, and computer programs in order as soon as possible. These are compelling reasons to pass a final extenders bill promptly during the lame-duck session."
In an Oct. 6 letter to Sen. Ron Wyden, chairman of the Senate Finance Committee, IRS Commissioner John Koskinen wrote,
"The IRS is currently facing a great deal of uncertainty related to the expired provisions which raises serious operational and compliance risks. … This uncertainty, if it persists into December, could force the IRS to postpone the opening of the 2015 filing season and delay the processing of tax refunds for millions of taxpayers."
If substantive changes are made, apart from simply continuing extenders that existed at the close of 2013, that means a range of administrative changes must be made to policies, forms, rules, etc.
While it might seem that members of Congress would be anxious to approve tax deductions for a wide range of constituency groups, there are, as always, complications.
Some Republicans want certain business tax extenders made permanent, but others don't. Among Democrats there are those who oppose this move for R&D because they say the extender will cost too much. Some Republicans don't want an extender for the Wind Power Production Tax Credit.
The jockeying for position by both sides is formidable and fierce, and that's just a small smattering of the pushing and pulling underway. Throw in the desires of interest groups for and against various tax extenders and the potential for gridlock is high. Meanwhile, the calendar pages continue to turn.
It would be great to say there's a way to deal with, manage, or otherwise overcome — for tax preparation purposes — issues related to potential tax extender delays, revisions, or nonrenewal.
But the reality is that everyone in America is sitting, waiting, and wondering — an unpleasant adventure in limboland.
Jimmy Rodefer is CEO of Rodefer Moss & Co. PLLC, a three-state accounting firm headquartered in Knoxville.
This was originally printed in the Knoxville News Sentinel on November 29, 2014.
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