With some investments already feeling the pain of the looming cliff, millions of Americans are at risk of being affected. The first to consider is the expiration of the Bush-era tax cuts, according to CNBC's Jackie Deangelis.
you’re the type of person who likes to file your income tax return as
soon as possible, then you’ve got another reason to be frustrated by the
fiscal cliff stalemate in Washington, D.C.
Most of the tax
changes being discussed as part of the fiscal cliff negotiations would
go into effect in 2013, meaning that taxpayers would first have to
account for them when they went to file those tax returns in early 2014.
But a handful of the provisions under discussion could affect Americans’ 2012 .
The down-to-the-wire negotiations in the nation's capital could leave
the IRS scrambling to adopt the changes in its systems, delaying the
agency’s ability to accept some people’s returns.
oftentimes waits until the last minute to pass legislation, and then
that in a turn affects the IRS,” said Bob Meighan, vice president with
tax provider TurboTax.
That's definitely been the case this time around. Just a few days
before the end of the year, Congress has not been able to come to an
agreement over a series of tax increases that are scheduled to go into
effect Jan. 1. President Barack Obama said Friday that he was "modestly
optimistic" a deal could still be reached to avert going over the
so-called fiscal cliff.
Acting IRS Commissioner Steven T. Miller has already warned that
there could be serious filing delays if Congress doesn’t provide a
patch for the Alternative Minimum Tax. An IRS spokesman said Friday that
the agency did not have any further information beyond the warnings
Miller gave to lawmakers in a letter earlier this month.
is a provision in the tax code that was designed to ensure that wealthy
taxpayers have to pay at least a minimum amount of taxes. It was never
indexed for inflation, however, so Congress has had to provide temporary
fixes over the years to ensure that lower-income taxpayers aren’t
That hasn’t happened yet this year because of the fiscal
cliff stalemate. In the letter to House Ways and Means Committee
Chairman Dave Camp earlier this month, Miller, the acting IRS
commissioner, warned that if Congress doesn’t provide a patch this year,
then the IRS would have to make significant programming changes to
account for that.
“In that event, given the magnitude and complexity of the changes
needed, I want to reiterate that most taxpayers may not be able to file
their 2012 tax returns until late in March of 2013, or even later,”
Miller wrote in the Dec. 19 letter.
Miller also warned that as many as 30 million additional taxpayers could be subject to the AMT if a patch isn’t put in place.
For now, Miller said the IRS is acting as if Congress will provide an AMT patch.
of TurboTax, said his company also has prepared its software as if a
patch will be in place. But he said the company also is ready to switch
gears quickly if it must.
Meighan said a few other provisions
under discussion as part of the fiscal cliff negotiation could affect a
minority of taxpayers in 2012. Those include a deduction teachers get
for school supplies they purchase for their and a tuition and fees deduction that applies to some students.
The IRS has had to ask people to delay filing their returns before. In 2010, Congress passed last-minute tax changes on Dec. 17. As a result, the IRS said it wouldn’t be able to accept returns with itemized deductions until February of 2011 because it needed time to adjust its systems.
people are forced to wait to file their tax returns, that would also
mean a delay in getting tax refunds. Roberton Williams, a senior fellow
with the Tax Policy Center, said that in turn could have some effect on
the economy because many people count on that money to pay off debt or
buy big-ticket items.
If the AMT isn’t patched at all, he noted,
that would be an even bigger economic hit because some taxpayers
wouldn’t get their expected refund at all.
“That will have a major
effect on the economy,” Williams said. “It will be pulling a lot of
money out of the economy that people are expecting.”
Despite the Congressional deadlock, experts say they are still assuming a deal will be made to put the patch in place.
“For most people, come 2013 they’ll be able to file their taxes, they’ll get their refund and life goes on,” Meighan said.
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