A.J. Gross, President of ALG Tax Solutions, was called upon as a tax expert to discuss tax extenders on Lansing’s Tony Conley Morning Show airing on 1320 WILS.
The interview was broadcasted live on Thursday, November 20, 2014. Tony Conley asked A.J. Gross about the tax extenders and how Congress inactivity could delay tax season.
1320 WILS Tony Conley Morning Show Recording
What are Tax Extenders?
Tax extenders are 55 tax breaks for business and individuals that expired on 12/31/2013. This means businesses and individuals can not take advantage of these tax breaks in 2014. However, Congress can change this by doing one of two things.
Option 1: Make the tax breaks permanent. The tax breaks would be renewed retroactively. Business and individuals will be able to take advantage of the tax breaks for all of 2014 even though the law was passed in December of 2014. Furthermore, if the tax breaks are passed permanently, there would be no issues with the tax breaks expiring on 12/31/2014.
Option 2: Extend the tax breaks for one year. Similar to option 1, the tax breaks would be renewed retroactively. Business and individuals will be able to take advantage of the tax breaks for all of 2014 even though the law was passed in December of 2014. However, unlike option 1, the tax breaks would expire on 12/31/2014. Then we would have to wait for Congress to act on the tax breaks again in 2015. This is a poor choice for tax planning. Businesses and individuals would not be able to plan for the tax breaks in 2015 until Congress addresses the tax extenders. In the past three years, Congress acted on the tax extenders in December of every year. In other words, Congress waited until the last minute.
What is at Stake? Tax Credits and Deductions
The following are examples of the tax extenders. All these credits and deductions expired on 12/31/2013. Congress can renew the tax extenders retroactively. Overall there are 55 different tax breaks at stake.
Credits for purchasing energy efficient improvements to your home.
Work opportunity tax credit
$250 deduction for teachers that purchase supplies for their classrooms and students
The option of deducting state and local sales taxes instead of state and local income taxes.
Deduction for mortgage insurance premiums
Exclusion to not treat the discharge of debt on your home as income.
First year depreciation for cars and trucks was increased by $8,000
50% bonus depreciation for business assets purchased in the year.
Maximum Section 179 deduction for 2013 was $500,000 for purchases under $2,000,000. The deduction revered back to $25,000 for purchases under $200,000 in 2014.
Tax Season Delay?
In mid-October, IRS Commissioner John Koskinen told members of the Senate Finance Committed that Congress should address the tax extenders by the end of November to prevent disruptions in the 2015 tax filing season. As the date of this post, Congress has not passes the tax extenders.
There is a good chance the tax extenders will be passed for 2014. However, the feeling in Washington is that the tax extenders will be renewed for 2014 only. This is Option 2 described above and the tax extender issue will come up again in 2015.