It’s an annual ritual in recent years, one that reflects the dysfunctional, deficit-driven dance of an overly contentious Congress.
One again, Congress is letting numerous tax breaks expire. But because Congress also has a pattern of reinstating those breaks months later in a piecemeal manner, the result is to make individuals and businesses uncertain once again about what their tax obligations will be.
In this post, our first of the New Year, we will discuss this pattern of expirations and extensions for various tax breaks and how it affects taxpayers’ ability to comply with the complicated U.S. tax system.
The breaks we are talking about include such things as tax credits for renewable energy, as well as for certain educational expenses.
There are also targeted tax breaks for very specific types of taxpayers. Importers of rum, for example, have historically received tax breaks.
In planning for the future, both businesses and individuals could use the stability and certainty that comes with knowing what their tax obligations are likely to be. After all, it’s difficult to determine how taxes will affect your finances when the rules keep changing so often.
In recent years, however, Congress has been unable to maintain continuity in its tax policy. The pattern has been to eventually renew popular tax breaks – but only after letting them expire first.
The result is a tax system that is both more complicated and more uncertain than it needs to be. And when that is the case, the chances can increase that the IRS will find something to question in a tax audit.
Source: Slate, "Congress is about to let 55 tax breaks expire," Mark Joseph Stern, Dec. 31, 2013