The tax season usually brings a mix of anticipation and trepidation, but this year, it's spiced up with a dash of uncertainty. The House Ways and Means Committee recently unveiled the Tax Relief for Workers and Families Act, which aims to revive several expired tax breaks. This bipartisan tax extenders package includes provisions like the enhanced Child Tax Credit, deductions for research and development expenses, 100% bonus depreciation, improvements to the Low-Income Housing Tax Credit, disaster tax relief, and even a tax agreement with Taiwan.
Ideally, Congressional leaders had hoped to pass this $78 billion bill before the official start of tax-filing season on January 29th. However, ongoing disagreements over certain provisions make this goal seem unlikely.
Some lawmakers have proposed amendments to lift the $10,000 cap on state and local tax deductions and allow the enhanced Child Tax Credit to provide monthly payments to families. These proposals, however, were voted down in committee. Yet, advocates are still working behind the scenes to include these items and others.
Ken Kuykendall, tax leader at PwC US, describes it as a "compromise position" as Congressional leaders strive to balance extending business-related tax breaks while also providing relief through the Child Tax Credit.
The bill's funding primarily comes from ending the Employee Retention Credit at the end of the month and increasing penalties for fraudulent claims. Historically, tax extenders have not been funded, making this a unique development that reflects congressional leaders' concerns about deficits and budget gaps.
Additionally, the IRS has introduced a voluntary disclosure program for taxpayers who mistakenly claimed the Employee Retention Credit. This program allows taxpayers to return funds they may have received in error.
The IRS will also focus on adapting to changing tax laws, including the tax extenders bill, and dealing with its own funding challenges. Tax clients are cautiously optimistic about the bill's passage, as it offers potential relief and benefits despite the added complexity it may bring to their tax filing process.
In summary, this tax season comes with its share of surprises, and taxpayers and tax professionals alike are gearing up for what lies ahead.
Stay tuned for updates as the tax season unfolds.
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