So about that new tax deal… The Internal Revenue Service (IRS) doesn’t have much to say, so far, it seems. On their website, they have this headline, IRS Statement on Jan. 1 Tax Legislation Passed by Congress, which sounds promising, right? Until, of course, you read the statement which says this:
The IRS is currently reviewing the details of this week’s tax legislation and assessing what impact it will have on this year’s filing season. The IRS will soon make available additional information on when taxpayers can start filing 2012 tax returns.
No, I didn’t skip over anything. That’s the whole statement. There’s apparently not a lot to say at this point.
I don’t, of course, blame IRS for this fiasco. With the tax season officially kicking off on January 22, 2013, it couldn’t have passed anyone’s notice – even those in Congress – that giving an agency less than three weeks’ notice about how to administer returns for 140 million taxpayers (give or take a million) is, to put it mildly, optimistic.
I know what you’re thinking: the tax deal was for 2013, so what’s the hold up for 2012?
The hold up is that the tax deal did more than a few things retroactively. The most significant move was fixing the alternative minimum tax (AMT). While the focus on the AMT in the press was for 2013 and forward, for taxpayers, it was for 2012. Congress didn’t patch the AMT after 2011 which meant that the lower thresholds applied; in simple terms, an additional 30 million taxpayers were to be subject to the AMT without a fix. We got one. In 2013. For 2012.
Also effective retroactively? The commuter tax break. The break boosts the pre-tax dollars employees could spend on mass transit to keep it in line with parking benefits. It had expired in 2011 and was restored for 2012 and 2013. No firm word yet on how those mechanics will work since the “pre-tax” bit is a little more difficult to maneuver after the fact.
A few previously expired deductions are now also in play for 2012. The above-the-line (meaning that you don’t have to itemize to claim them) deductions for educator’s expenses were reinstated (for up to $250) as was the tuition and fees deduction (up to $4000). On the itemized size, the option to deduct state and local sales taxes as opposed to state and local income tax was restored, as was the inclusion of mortgage insurance premiums as part of deductible home mortgage interest.
Don’t forget about debt relief: the exclusion from gross income for discharging certain qualified principal residence indebtedness (that’s your mortgage) is also included in the tax deal retroactively.
These are largely good changes for taxpayers – but would have been just as good months ago. The delay means that now, there are a lot of new forms to be printed, a lot of software programs to finagle. I’d be surprised – and wildly impressed, mind you – to see tax season kick off on time this year for all taxpayers. But fingers crossed, right?
