Tax preparers say they're well prepared for the 2012 tax season, in spite of last-minute changes during the fiscal cliff crisis.
Last-minute congressional negotiations launched a flurry of changes in the tax code, some of which affect the 2012 filing season, and others that won't start until this year. Tax preparers worry most about the 2013 filing season.
The biggest worries centered around the alternative minimum tax, designed to make sure that the very wealthy pay at least some income taxes. But until the fiscal cliff legislation was passed, Congress had to raise the threshold for inflation periodically.
If Congress had not acted, AMT thresholds would have rolled back to 2000, potentially making 60 million filers pay AMT. But Congress has finally enacted a "permanent" fix for AMT, which will raise the thresholds automatically for inflation. "They've taken it off the list of things to debate every few years," says Mark Steber, Jackson Hewitt's chief tax officer.
But AMT wasn't all that tax preparers had to worry about. Another dozen tax provisions, from deductions for college tuition and fees to tax-free IRA distributions for charities, all had to be extended as well.
As the debate raged, preparers had to make their best guesses about what would and wouldn't happen, and be ready for several different outcomes. Most figured, for example, that the AMT fix would pass Congress.
"Our biggest fear was that they would tweak it," Steber says. "What may seem like a small change can be a big one."
Nevertheless, most felt that the 2012 tax filing season would go smoothly. "Late legislation is nothing new to us," says Bob Meehan, vice president at TurboTax. "This is pretty much standard fare."
Will the last-minute fiscal cliff legislation stall tax refunds? So far, the IRS isn't sure. "The IRS is currently reviewing the details of this week's tax legislation and assessing what impact it will have on this year's filing season," the department said in a press release. It promised to make additional information soon.
TurboTax says it can start taking returns Thursday, but those returns will be stockpiled until the IRS is ready to accept them - originally scheduled for Jan. 22, Meehan says. Typically, about 60 million taxpayers have filed by the end of February.
Filers might be more anxious than usual for refunds, which average about $3,000 per taxpayer, this year. The 2-percentage-point reduction in Social Security payroll taxes ends in 2013, and workers will feel that in their first paycheck of the year. Higher rates for top earners will also kick in this year.
John Waggoner, USA TODAY