What Does the “Fiscal Cliff” Mean for Your Tax Burden?
As if the tax code wasn’t already complicated enough, millions of Americans are currently facing the threat of a major tax increase in 2013. Notice that we said “threat.” This is because, as crazy as this may sound, we still don’t know. The partisan gridlock that has taken over Washington DC means we don’t know what to expect from the tax code mere months from now.
What we DO know is that, as of right now, millions of Americans are in line for a tax hike. Bloomberg reports:
Taxpayers would face “serious repercussions” if Congress doesn’t act by Dec. 31 to prevent the alternative minimum tax from expanding, according to the Internal Revenue Service.
About 28 million taxpayers would face an unexpected liability for tax year 2012 that has been estimated at $92 billion. Furthermore, the IRS would also need to reprogram its computer systems, delaying tax filing for 60 million taxpayers from January 2013 until “late March 2013, if not even later,” Steven Miller, the acting IRS commissioner, wrote in a letter today to Senator Max Baucus, a Montana Democrat who’s chairman of the Senate Finance Committee.
“Tens of millions of these taxpayers would unexpectedly have to pay additional income tax for 2012, leaving them with a balance due return or a much smaller refund than expected,” he wrote. “For millions of other taxpayers, refunds would be delayed.”
He sent identical letters to the other top tax writers on Capitol Hill, Senator Orrin Hatch of Utah, the top Republican on the Senate Finance Committee, and Michigan Representatives Dave Camp and Sander Levin, the Republican chairman and the top Democrat, respectively, on the House Ways and Means Committee.
The expansion of the AMT is part of the $607 billion fiscal cliff of tax increases and spending cuts that Congress is trying to avert.
As if it wasn’t hard enough to stay on top of IRS regulations already, now taxpayers and business owners have to watch while elected officials play with the tax code. This complication is not helpful for the economy, for businesses, or for taxpayers. And it will almost certainly result in further confusion and therefore more IRS disputes than ever before. Don’t be caught off guard—make sure you speak to a tax professional to stay on top of these ever-changing regulations!