Fiscal cliff slows income tax filing
In his offices in Carroll Township, tax preparer Pete Jenkins has six files of tax returns in different stages waiting to be filed.
“I'm preparing taxes and getting them ready, but I can't file them yet,” said the owner of Pete Jenkins Tax, Accounting and Financial Services.
“Some are filed, some are waiting for one form, some are waiting for two forms. This is all due to the fiscal cliff not being rectified until the last minute.”
Washington's dangling act with the fiscal cliff deadline has created a delay for tax preparers.
Congress passed the American Taxpayer Relief Act of 2012 on Jan. 1. The Internal Revenue Service needed four to six weeks to reprogram its computers for the tax law.
The IRS began accepting some tax returns Jan. 30, but 30 various forms won't be accepted electronically by the IRS until late February or early March, Jenkins said.
Among the more popular forms on hold are: 4562, Depreciation and Amortization – nearly every business client uses this form if he or she has purchased new equipment; 5695, Residential Energy Tax Credits; and 8863, Education Credits (American Opportunity and Lifetime Learning Credits).
Jenkins estimated that filing returns for about one-third of his clients has been put on hold.
Alice Stiles, owner of Stiles Tax Service in Dunlevy, said the IRS status has not slowed down her business so far.
“We've continued to get returns done and get them signed,” Stiles said. “We just can't e-file them yet.
“Anyone using forms that are not updated, we let them know the situation upfront.”
When taxpayers approach their returns this year, they will face some significant changes. In two instances, taxpayers in all brackets will feel a pinch.
The payroll tax holiday of 2011 and 2012 was allowed to expire. While all are seeing a 2 percent bite in their paychecks, Jenkins said the holiday expiration is likely good for Social Security.
“They had no business cutting that,” Jenkins said. “Social Security is in trouble and then to cut the employee contribution by 2 percent, that's ridiculous.”
The top tax bracket for single taxpayers earning $400,000 or more, or married couples filed jointly earning over $450,000 rose from 35 percent to 39.6 percent.
Two other tax law changes for 2013 will benefit taxpayers. The maximum gift tax exclusion rose from, $13,000 to $14,000. And the maximum contribution to IRAs rose from $5,000 to $5,500. Those 50 years of age and older can add an additional $1,000 to an IRA.
A five-year extension was added to the college tuition, earned income and child tax credits.
But for many businesses, this year is the time to begin planning for 2014.
Starting in 2014, businesses employing at least 50 that do not currently offer health insurance must begin doing so or face a $2,000 per employee penalty. Compliance under the law, a part of the Affordable Care Act, will be based on employee rolls in 2013.
Jenkins said some companies that do not currently offer health insurance face three potential decisions – offer health insurance for their employees, lay off workers to get under the 50 employee threshold or – for larger firms especially – incorporate into various divisions each with less than 50 employees.
Chris Buckley is a staff writer for Trib Total Media. He can be reached at 724-684-2642 or email@example.com.