Tax Extenders And Will I Be Affected?
On Feb. 9, 2018, Congress reached a budget reached a budget deal (remember the overnight government shutdown?). Tucked away in the bill, were “surprise tax breaks on homeowners, students and greenies.” Those tax breaks are the extenders, or provisions that expired at the end of 2016 but have been extended through 2017. Yes, through 2017, as of 2018. The tax breaks are retroactive to January 1, 2017, and affect the tax return that you will file in 2018. For early filers, it affects the tax returns that you have already filed in 2018.
As of last week, the Internal Revenue Service (IRS) had already received 18,302,000 tax returns and had processed 17,931,000; that number is likely double by now. If you’ve already filed your tax return and think you might be affected by the tax extenders provisions, here’s what you need to do:
With tens of millions of returns already in the system, the IRS wasn’t prepared to react immediately to the new law, issuing a statement that said, about the extenders: The IRS is reviewing the legislation signed Feb. 9 that retroactively extended and modified numerous tax provisions covering 2017. We are assessing these significant changes in the tax law and beginning to determine next steps. The IRS will provide additional information as quickly as possible for affected taxpayers and the tax community.
That said, there are nods to many of the expired provisions on the current tax forms, like line 34 on the form 1040, which IRS marked as “Reserved for future use.” That could make revising those forms easier than anticipated, so hold tight.
As long a laundry list as the extenders might be, many of the provisions are quite targeted. That means that some of them are so niche-y as to apply to a limited number of taxpayers (like racehorse owners and miners). The provisions that most likely impact you as an individual taxpayer include extensions for:
- exclusion from gross income of discharge of qualified principal residence indebtedness
- mortgage insurance premiums treated as qualified residence interest
- above-the-line deduction for qualified tuition and related expenses
- credit for nonbusiness energy property
- credit for residential energy property
- credit for new qualified fuel cell motor vehicles
- credit for alternative fuel vehicle refueling property
- credit for 2-wheeled plug-in electric vehicles
Amend your tax return. It’s easy enough to fix a mistake (like a missed tax credit or deduction – even if it wasn’t your fault). Don’t file an additional form 1040 – you’ll confuse matters. Instead, file an amendment, that is what Alliance Tax Preparation is for. It’s not a particularly difficult form, but it is time-consuming to process: During tax season, a federal form 1040X usually takes an additional 8 to 12 weeks to process (in some instances, IRS says it could take 16 weeks). Be aware that the return won’t even show up in the system for about three weeks.
That said, I don’t know that I would rush right out to amend. I would wait to see whether IRS offers an alternative solution in the near future.
Be prepared to pay. I know it stinks but be prepared to pay for an amended return. It’s extra work during the busiest time of tax year for a “mistake” that tax pros did not create. That’s like ordering a get well cake for your mom’s surgery, finding out that the surgery has been pushed off, and expecting the baker to redo the cake for free. Is it annoying? Sure it is. But it wasn’t a mistake that your tax professional created.
Reach out to Congress. If you’re annoyed by the inconvenience of potentially redoing your tax return, don’t take it out on your tax pro or your tax software manufacturer or the kid at the grocery store: It’s not their fault that they don’t have crystal balls. Instead, let your representatives in Congress know that you’re unhappy. (Excerpts taken from Forbes mag.)