Autumn leaves and chill mornings bring delight. Returning from a day of continuing education on the changes in tax reporting is also part of the fall season. Each year there are significant income tax changes; I marvel at the news media stating no significant changes since 1986 and the Tax Reform Act creating the short passive rules that have blossomed out into career niches and tax returns of 5 pages blossoming into 150 page returns. Legislation is only 1/3 of the legal system, yet there is grandstanding and aggrandizement as if it the House and the Senate were Roman Rulers beyond question.
To my thinking the income tax system is roughly:
!/3 Cup legislation
1/3 Cup regulations by the authorized body
1/3 Cup judicial findings that are intended to bring rational order to the other two
Mix well throughout the nation; seek active compliance of all wishing to share the benefits from the system which includes roadways, potable water and clean air. Sprinkle lightly with humor. Cover with grace. Bake until golden.
The prospects of the unresolved regulatory issues tidily tucked under front page articles of government shutdown give the IRS an added challenge of publishing timely guidance. The downstream is that again this year the computer programmers for tax return preparation are once again speculating on outcomes. I ask myself whether Michigan will again delay acceptance of a common vendor’s returns for revision of programming assumptions? Will another brick an mortar national vendor march forward as confidently as in 2013 after the turmoil of spring fines?
I invested in the best resources I could find last spring as my tax vendor of several years clearly was unable to cope. This year already has early filing delays published by the IRS as well as late form date promises. It is a time for deep breathing and careful cultivation of serenity through conscious choices by votes, thoughts, letters, emails, and actions.
Healthcare reforms include quite a few tax incentives and client retraining considerations. With the tax credits for business insurance coverage premiums increasing to a maximum of 50% in January, 2014, defining new information needs for business is imperative. Beyond that, the individual has new reporting responsibilities. Stay Tuned for more on this topic.
One famous movie actress wrote amount of dollars and bank permission to pay (check) on her toilet seat and sent it to the IRS several decades ago. And, yes, the bank did honor and pay the check to the IRS. The autofill proposal would maybe work for teenagers claiming themselves. It would play havoc with their parents or others supporting the teenager. For the rest of us this is a distraction and a door opening to the new statistics on why the latest tax season was a debacle. PLEASE remember this was deliberately created by Congress in the face of requests of professionals and of the IRS’ own July, 2012 requests.
Please view the upcoming debates and statistics as a created tsunami of the people, by the people, and for the people. THEN CHOOSE WHAT YOU WANT CONGRESS TO DO AND WRITE, FAX, EMAIL, and DIRECT THEM TO ACT!
So FOLKS-YOOOHOOO–Are you there? The IRS asked for congress to act July, 2012. But no, WE THE PEOPLE, allowed ALLOWED A_L_L_O_W_E_D and even encouraged the bickering and backbiting rather than swamping CONGRESS with faxes, letters, and emails to act like ‘responsible business folks’ that we elected to run this community called the USA. I tried to get my local community caring in November without success. WE DID THIS TO OURSELVES!
We The People owe it to OURSELVES to take responsibility and stop pointing fingers at the IRS or the tax programmers.
“600,000+ Tax Refunds Delayed by Education Credit Glitch
March 13, 2013
By Michael Cohn, Editor-in-Chief, AccountingToday.com
The Internal Revenue Service has found that changes in Form 8863, Education Credits, are delaying more than 600,000 tax returns, many of which appear to come from H&R Block.” More of this article is at http://www.accountingtoday.com/news/Tax-Refunds-Delayed-Education-Credit-Glitch-66031-1.html
In this time compressed tax filing year, notices regarding efile now have their own IRS webpage. Those clients urgently seeking their refunds by efile are thwarted by thousands of efiles submitted before them while those paying on April 15th by check are refraining from comment. I quote the site and provide the link below.
“Modernized e-File Production System is Operational (Posted 9:00 am, Eastern 03/06/2013)
Modernized e-File (MeF) was successfully brought back online at 7:00 am, Eastern on March 6, 2013 and is now operational for all service requests. Please resume sending federal and state submissions, sending state acknowledgements and retrieving federal and state acknowledgements.
We thank you for your patience and we apologize for any inconvenience caused.
Please continue to monitor the MeF Status Page for any updates.”
posted to http://www.irs.gov/uac/Modernized-e-File-%28MeF%29-Status-Page
At this writing I have heard no success or failure reports on the IRS rule testing day, Sunday, March 3. I have seen that normal processing of efile returns of business and individual returns containing previously unaccepted forms like solar credits are to begin this week.
Several tax vendors are having difficulties this season, including my prepaid provider of 7 productive and successful years. I have conscientiously searched through vendors for product vigor and quality of software reviews. I am converting my practice to ProSystemfx by CCH this week in order to provide my clients with the best service possible for the 2013 tax filing season.
The Tax Reform Act of 1986 was quoted as being the Full Employment Act of Accountants because of the new concept of passive income. Perhaps this January’s tax legislation will be named the Full Employment Act of Tax Software Programmers for the new concept of real-time testing using current tax filings based on programmer’s knowledge of income tax conventions and judicial findings.
From January 4th legislation to January 30th is only 3 1/2 work weeks. In that short period of time, several of the key efile schedules will be completed allowing many to efile immediately upon receiving their W-2 and 1099 forms. There is a new W2 space indicating the cost of health benefits for businesses employing 250 or more. Businesses with fewer than 250 are exempt from health benefit reporting for 2012 and beyond.
Depreciation calculations most likely will not be available. As a result, most business tax returns and individual tax returns with Schedule C are expected to have delayed filings. The choice of which forms would be completed appears to have been based upon historical efile and the complexity of the changes to tax law made by Congress.
Traditionally, it has taken 45 to 60 days to go from law to regulation to form development and approvals through to finished product. From the preparer side, I attended a web discussion regarding the temporary regulations and the proposed filing years affected.
Tax programs for both efile and printed applications likewise have an approval process. There is a great need for mutual approvals, testing and cooperation of the private sector with federal and state governments at this time.
The indecision and procrastination on year-end tax provisions will result in downstream actions and reactions. I prefer that history does not repeat in retroactive legislation effective January 1, 2012 as was in fact done in 1988-1989.
Paraphrasing the words of a tax instructor some years back: Guess what, folks, the flat tax is here in AMT. His words have never been more true.
With a 60-90 day lead time for selected tax form approvals and release, it is a year to extend early and often. Please be aware that payments not made before April 15th in anticipation of downstream legislation could incur penalties and interest. By that I mean that even if there are no forms for filing by April 15th, non-payment of estimated amounts owed with extension is not a recommended action.
We have an opportunity to choose something other than a reality check. The reality check is that the US House of Representatives can logically and calmly work through tax legislation before New Years or much of the United States will be subjected to a flat tax.
The name of the flat tax is Alternative Minimum Tax. It has been patched and patched, patched and patched. Should the current patch be allowed to expire, there will be a flat tax imposed for millions of Americans.
This income tax preparer would prefer timely action rather than untimely reaction.
With the choice of the people through the election process and the Supreme Court endorsing it, the healthcare provisions stand. In addition, for employers with more than 250 employees, benefits reporting is mandatory. For those employers with fewer employees, including benefits provided to the employee is not required for W-2s arriving in January, 2013.
I have observed little resistance to mandated employee benefits disclosure on some of the W-2s arriving in January, 2013. At this time, I do not expect payroll reporting to be delayed despite forms changes. At this time from my perspective, it appears that neither the income tax filing procedures or forms printing will delay either paper or efile income tax reporting processes.