Monthly Archives: December 2013

2014 tax breaks: Congress letting 55 tax breaks expire at year end

WASHINGTON – In an almost annual ritual, Congress is letting a package of 55 popular tax breaks expire at the end of the year, creating uncertainty — once again — for millions of individuals and businesses.

Lawmakers let these tax breaks lapse almost every year, even though they save businesses and individuals billions of dollars. And almost every year, Congress eventually renews them, retroactively, so taxpayers can claim them by the time they file their tax returns.

2014 tax breaks: Congress letting 55 tax breaks expire at year endNo harm, no foul, right? After all, taxpayers filing returns in the spring won’t be hurt because the tax breaks were in effect for 2013. Taxpayers won’t be hit until 2015, when they file tax returns for next year.

Not so far. Trade groups and tax experts complain that Congress is making it impossible for businesses and individuals to plan for the future. What if lawmakers don’t renew the tax break you depend on? Or what if they change it and you’re no longer eligible?

“It’s a totally ridiculous way to run our tax system,” said Rachelle Bernstein, vice president and tax counsel for the National Retail Federation. “It’s impossible to plan when every year this happens, but yet business has gotten used to that.”

Some of the tax breaks are big, including billions in credits for companies that invest in research and development, generous exemptions for financial institutions doing business overseas, and several breaks that let businesses write off capital investments faster.

Others are more obscure, the benefits targeted to film producers, race track owners, makers of electric motorcycles and teachers who buy classroom supplies with their own money.

There are tax rebates to Puerto Rico and the Virgin Islands from a tax on rum imported into the United States, and a credit for expenses related to railroad track maintenance.

A deduction for state and local sales taxes benefits people who live in the nine states without state income taxes. Smaller tax breaks benefit college students and commuters who use public transportation.

A series of tax breaks promote renewable energy, including a credit for power companies that produce electricity with windmills.

The annual practice of letting these tax breaks expire is a symptom a divided, dysfunctional Congress that struggles to pass routine legislation, said Rep. John Lewis of Georgia, a senior Democrat on the tax-writing House Ways and Means Committee.

“It’s not fair, it’s very hard, it’s very difficult for a business person, a company, to plan, not just for the short term but to do long-term planning,” Lewis said. “It’s shameful.”

With Congress on vacation until January, there is no chance the tax breaks will be renewed before they expire. And there is plenty of precedent for Congress to let them expire for months without addressing them. Most recently, they expired at the end of 2011, and Congress didn’t renew them for the entire year, waiting until New Year’s Day 2013 — just in time for taxpayers to claim them on their 2012 returns.

But Congress only renewed the package though the end of 2013.

Why such a short extension? Washington accounting is partly to blame. The two-year extension Congress passed in January cost $76 billion in reduced revenue for the government, according to the nonpartisan Joint Committee on Taxation. Making those tax breaks permanent could add $400 billion or more to the deficit over the next decade.

With budget deficits already high, many in Congress are reluctant to vote for a bill that would add so much red ink. So, they do it slowly, one or two years at time.

“More cynically, some people say, if you just put it in for a year or two, then that keeps the lobbyists having to come back and wine-and-dine the congressmen to get it extended again, and maybe make some campaign contributions,” said Mark Luscombe, principal tax analyst for CCH, a consulting firm based in Riverwoods, Ill.

This year, the package of tax breaks has been caught up in a debate about overhauling the entire tax code. The two top tax writers in Congress — House Ways and Means Committee Chairman Dave Camp, R-Mich., and Senate Finance Committee Chairman Max Baucus, D-Mont. — have been pushing to simplify the tax code by reducing tax breaks and using the additional revenue to lower overall tax rates.

But their efforts have yet to bear fruit, leaving both tax reform and the package of temporary breaks in limbo. When asked how businesses should prepare, given the uncertainty, Camp said: “They need to get on board with tax reform, that’s what they need to do.”

Further complicating the issue, President Barack Obama has nominated Baucus to become U.S. ambassador to China, meaning he will soon leave the Senate, if he is confirmed by his colleagues.

As the Senate wound down its 2013 session, Democratic leaders made a late push to extend many of the tax breaks by asking Republican colleagues to pass a package on the floor of the Senate without debate or amendments. Republicans objected, saying it wasn’t a serious offer, and

the effort failed.

So should taxpayers count on these breaks as they plan their budgets for Income Tax 2014?

“The best thing I would say is, budget accordingly,” said Jackie Perlman, principle tax research analyst at The Tax Institute. “As the saying goes, hope for the best but plan for the worst. Then if you get it, great, that’s a nice perk. But don’t count on it.”

Discuss this and more at the Income Tax Forums.

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2014 IRS Refund Cycle Chart for 2013 Tax Year

http://refundschedule.com/2014-irs-e-…

What to Expect for Refunds in 2013
The IRS issued more than 9 out of 10 refunds to taxpayers in less than 21 days last year. The same results are expected in 2013.
Even though the IRS issues most refunds in less than 21 days, it’s possible your tax return may require additional review and take longer.
Use Where’s My Refund? to Check the Status of Your Refund.
Where’s My Refund? has a new look for 2013! The tool will include a tracker that displays progress through 3 stages: (1) Return Received, (2) Refund Approved and (3) Refund Sent.
You will get personalized refund information based on the processing of your tax return. The tool will provide an actual refund date as soon as the IRS processes your tax return and approves your refund. Remember, most refunds will be issued in less than 21 days.
In 2013 you will be able to start checking on the status of your return sooner – within 24 hours after we have received your e-filed return or 4 weeks after you mail a paper return.

IRS Delays Start of 2014 U.S. Tax Filing Citing Shutdown

IRS Delays Start of 2014 U.S. Tax Filing Citing ShutdownThe U.S. Internal Revenue Service delayed the start of the tax-filing season for one to two weeks, citing the recent 16-day federal government shutdown.

The IRS, which had been scheduled to open filing Jan. 21, 2014, will now begin accepting returns for tax year 2013 as early as Jan. 28. The agency will make a final decision on the date in December, according to a statement today.

“Readying our systems to handle the tax season is an intricate, detailed process, and we must take the time to get it right,” Danny Werfel, the acting IRS commissioner, said in the statement.

This is the second year in a row that the IRS has postponed the filing season. Returns for 2012 were accepted starting on Jan. 30 after Congress delayed setting some tax policies.

“Considering the IRS has dealt with much larger changes on far shorter notice over the past years without delay, its reasons are suspect,” Sarah Swinehart, a spokeswoman for the Republican-led House Ways and Means Committee, said in an e-mail.

The IRS furloughed more than 90 percent of its employees during the shutdown, which began Oct. 1 when Congress was unable to pass a spending bill and ended after midnight Oct. 17.

‘Adds Insult’

“This is yet another unfortunate effect of a shutdown that Republicans should have never caused,” Representative Sander Levin of Michigan, the top Democrat on the Ways and Means Committee, said in a statement. “This tax-filing delay just adds insult to injury for Americans hoping to get a jump-start on their tax refunds in January.”

The delay won’t alter the April 15 deadline for taxpayers to file their returns or seek extensions.

At the start of the filing season, the IRS largely issues refunds to taxpayers who file as soon as they can. This year, the IRS issued $135 billion in refunds from Jan. 30 to March 1. That’s more than was paid from March 2 to May 10, when the agency received 50 percent more returns.

Delaying refunds could have an additional consequence in 2014. The U.S. debt limit is suspended through Feb. 7, and changes in the government’s projected spending after that date will affect the timing of how long the Treasury Department’s extraordinary measures to prevent a default will last.

Because the government may issue more refunds after Feb. 7 than previously anticipated, a potential lapse in borrowing authority could come a few days sooner than projected, said Loren Adler, research director at the Committee for a Responsible Federal Budget in Washington.

The delayed start of tax-filing season probably will create a backlog of potential returns for the start date, rather than delaying all returns equally.

“Those are folks who are trying to do this as soon as their books are in order,” Adler said.

The Bipartisan Policy Center projects that the U.S. will run out of borrowing authority between the end of February and mid-March 2014.

Discuss this and more in the Income Tax Forums.

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