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Saturday, December 22, 2012

WSJ: Two Fiscal Cliff Tax Debacles: Reduced Tax-Home Pay, No Tax Filing Until March 31

Wall Street Journal Tax Report:  Paycheck Debacles, by Laura Saunders:

Lawmakers are working to keep the country from going over the "fiscal cliff," but already they have caused two snafus that will soon hit millions of pocketbooks—and maybe even the economy.

The first involves take-home pay, which could be lower than expected for many workers. Until Congress sets next year's tax rates, the IRS can't issue 2013 withholding tables, and employers in turn can't adjust computers and paychecks. ...

The other snafu is a certainty as well: a several-week delay in the coming tax filing season. This exists because several fiscal-cliff-related tax provisions expired at the beginning of 2012. The most important is an adjustment to the alternative minimum tax; others include popular breaks such as deductions for state and local sales taxes, tuition and fees, and schoolteachers' expenses, plus the charitable individual retirement account donation for people 70½ and older.

IRS Acting Commissioner Steven Miller warned in two recent letters to House Ways and Means Committee members that if lawmakers don't fix the alternative minimum tax, there will be dire consequences. Not only will the number of AMT payers swell to 34 million from about 4 million, but the agency's computers will have to be reprogrammed. Up to 100 million taxpayers—two-thirds of the total—might not be able file 2012 taxes before the end of March or even later, he said.

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