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US Accountants Look For Early Decision On Tax Extenders

by Mike Godfrey,, Washington

27 November 2013

The "on-again, off-again" nature of the group of federal tax provisions requiring frequent annual renewal, commonly called the "tax extenders," creates uncertainty for both taxpayers and their advisers, according to the American Institute of Certified Public Accountants (AICPA).

With 2014 approaching, Jeffrey A. Porter, Chair of the AICPA's Tax Executive Committee, explained that CPAs are busy meeting with clients to discuss year-end planning. "Typically, as a part of that process, we will discuss with clients transactions and the timing of those transactions – should it be before year end or after year end, for example – but that process is especially difficult with 57 tax provisions expiring on December 31."

"Some of the expiring provisions are significant," added Edward Karl, AICPA Vice President for Taxation. "For businesses, these include increased expensing under Section 179 (full deduction on cost of qualifying equipment), where the limit is dropping from USD500,000 to USD25,000; the 50 percent bonus depreciation; the work opportunity tax credit; and the credit for research and development expenses (which has now been temporary for around 30 years)."

For individuals, the tax extenders that are available until end-2013 include mortgage tax relief, the deduction for state and local sales taxes, education tax deductions, and tax-free distributions from individual retirement accounts for charitable purposes.

"It's not unusual for the expiring provisions to be reinstated retroactively," Porter noted, "also adding to the uncertainty and the complexity for long-term planning. Many taxpayers have come to anticipate that these expiring provisions are going to be retroactively reinstated. If they're incorrect, that can prove to be a very costly decision for a small or medium-sized business."

Karl pointed out that he expects lawmakers to consider the extenders at some point, but that the timing is uncertain. "We encourage Congress to act now to either extend the provisions or to signal that it intends to allow them to expire," he concluded. "We also urge Congress to make permanent those provisions that it intends to extend. In addition, we encourage Congress to enact future tax changes with a presumption of permanency, except in rare situations in which there is an overriding and explicit policy reason for making provisions temporary, such as short-term stimulus provisions or when a new provision requires evaluation after a trial period."

TAGS: individuals | tax | business | law | corporation tax | tax credits | legislation | United States | tax breaks | charities | legislation amendments | individual income tax | research and development | Tax

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