Will Tax Laws Change Mid-Filing Season?
Amongst a divided Congress still battling to approve a fiscal budget, the House Ways and Means Committee voted last week to move forward a bipartisan tax bill called the Tax Relief for Workers and Families Act. The goal is to extend some expired tax breaks before the April 15 tax deadline. The proposed bill could potentially mean tax law changes mid-filing season leaving many practitioners asking more questions than we’re getting for answers.
The proposed bill includes bringing back the expanded Child Tax Credit, allowing people to deduct research expenses right away instead of over time, allowing businesses to deduct the full cost of equipment purchases, improving tax credits for affordable housing projects, providing tax relief for disaster victims, and more. Many of the expiring tax provisions are supported by taxpayers but it’s unclear what the future of the bill is while the IRS is expected to begin accepting 2023 tax returns this week.
The proposed tax law changes come with a hefty, $78 billion price tag that the Federal Government will need to address. The proposed offset is the curtailment of future ERTC claims and more aggressive action against previously filed, fraudulent claims. The IRS announced last fall a moratorium on the ERTC filings as they sought to sort through a huge number of fraudulent refund requests. The moratorium was originally expected to end once the IRS had caught up on its initial review of the backlog.
As a response to the huge amount of fraud seen with the ERTC claims, the proposed bill would also include new penalties for employers who do not withdraw their fraudulent or incorrectly filed forms. While the increased penalties are meant to continue to put pressure on those who claimed refunds falsely, the proposal simultaneously increases the IRS workload who would need to coordinate efforts between the voluntary withdrawal program and the penalties being issued.
Lawmakers last week intended to pass the bill before tax season officially starts this Monday, January 29. But they still disagree on major provisions such as lifting the $10,000 limit on state and local tax deductions and bringing back the monthly Child Tax Credit payments, leaving it unlikely that taxpayers and practitioners will have answers before the start of the filing season.
Taxpayers all had hopes of smooth sailing for this tax season after a bolstered IRS budget last year produced noticeable gains in the backlogs at the agency and few major tax law changes at the end of the year. While the current bill proposes positive changes for taxpayers, the timing of the provisions is less than ideal. With IRS budget funds uncertain, the extra workload of late season tax law changes, in addition to the ERTC auditing, could result in another backlog of work frustrating taxpayers and practitioners alike.
Christine Gervais
Christine Gervais is a licensed CPA, using her skills to help businesses grow and achieve their fullest potential. Christine has a Master’s degree in accounting from Southern New Hampshire University in addition to holding her CPA license for over a decade. Notably, Christine is a nationally recognized speaker providing education to other CPAs on how to best serve clients as well as instruction on a wide variety of topics for business owners on how to maximize success. Christine prides herself on the value she can bring to clients with her extensive tax knowledge and providing strategic, forward-thinking financial strategies to help clients grow. When not behind her desk, you can find Christine spending quality time with her daughter and stepson or tending to the family’s excessively loved farm animals.