November 6, 2014, Mineola, NY–Congress has not passed any of the over 50 tax provisions that have already expired in 2014. Congress still has the ability to pass what’s referred to as “Extenders,” making them count for the 2014 tax season. Delays in passing Extenders could postpone the start of the 2014 tax season causing serious financial complications for millions of Americans.
Managing Partner of EP Caine & Associates CPA, LLC, Ed Caine, said: “We need Congress to pass these Extenders now. Waiting on receiving a tax refund can cause financial hardships for many. It is unacceptable that Americans must wait for their tax returns because they are unaware which deductions or tax credits they will have. It is unacceptable that they must sit and wait for Congress to pass the Extenders, as many small business owners and average Americans live on very tight budgets.”
Steve Mankowski, a partner of EP Caine & Associates CPA, LLC, Chair of the Tax Policy Committee and Executive Vice President of the National Conference of CPA Practitioners (NCCPAP), said, “If certain Extender provisions are not made permanent or kept as they were in 2013, significant financial challenges will come about for the American taxpayer. I feel strongly that at least two of these Extender provisions should be made permanent.” To view Mankowski’s interview on CNBC, visit http://cnb.cx/1uII4fB.
One of the Extenders Mankowski references deals with taxpayers who face a foreclosure or short sale on their primary residence. If a bank writes off $100,000 of debt, during the short sale of a home, that $100,000 is added to a taxpayer’s taxable income. This bumps the taxpayer into a higher tax bracket, which increases the amount of taxes owed. A taxpayer who underwent a short sale is typically not in the financial position to come up with thousands of dollars to pay the IRS. Passing this Extender would mean not tacking on the amount written off onto the taxpayer’s income.
Another provision deals with depreciation. On January 1, 2014, the amount that could be immediately taken as depreciation on equipment (Section 179) in the year of purchase, dropped from $500,000 to $25,000, which was the limit in the law before the $500,000 was enacted. Mankowski stated, “Although this provision is likely to be passed, it needs to be done quickly in order to allow business owners to determine before year-end if new assets should be purchased. Furthermore, this will aid business owners in calculating the true purchase cost of the assets. These capital expenditures could help stimulate the economy.”
The IRS has taken a “best guess” approach as to which expired provisions might be extended in an effort to curtail a repeat of the 2012 tax season when Congress did not pass the Extender legislation until January 2013. Taxpayers depending on a refund to pay expenses—for example to pay off holiday bills–file early. These are the taxpayers who were hurt by this delay in 2013 and stand to be hurt for this upcoming tax season. Ed Caine explained another complication, “Some forms were not available to be filed until mid-February 2013, and therefore, the entire 2012 tax season was compressed. Business owners who wanted to file earlier were forced to wait. It was an unnecessary stress placed on CPAs who, at that point, had less than 60 days from the time these forms were available to get their taxes done. “
Congress has not presented the President with any Extender legislation through the first ten months of this year. Each year, Congress has the responsibility to consider which tax provisions should be continued for another year, made permanent or allowed to sunset. For many years, Extenders were dealt with in advance of year-end. In recent years, this has not been the case: Congress has waited until the “lame duck” session to deal with expired or expiring provisions.
More About EP Caine & Associates CPA, LLC: Edward P. Caine is a Certified Public Accountant and managing partner at his firm with headquarters in Bryn Mawr, Pennsylvania, two other offices in Pennsylvania, one in New Jersey, and one in New York. The firm provides tax and bookkeeping services, as well as business services, to people and businesses throughout the Eastern United States. EP Caine & Associates CPA, LLC is a small firm with dedicated professionals that provide help with tax, accounting, and business services personally and professionally. To contact Ed Caine directly, call him at (610)-525-2933, or visit his website at cainecpa.com. You may also fill out our contact form here.