Congress was able to avoid a fiscal cliff even though it came down to almost the very last minute. However, due to their delay in reaching a consensus decision there will be possible ramifications for 2012 tax returns. According to CNN Money on Wednesday, Jan. 2 tax refunds remain up in the air and are expected to be delayed.
The late decision by congress has caused problems for the Internal Revenue Service. The IRS has to update their systems for 2012 tax forms to coincide with revised tax laws.
Electronic tax filing usually starts mid-January; however, the IRS has yet to issue the actual filing date for 2012 tax returns.
"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," said the agency, adding it will issue additional guidance "soon."
This may be a repeat of issues many taxpayers had to deal with two years ago when Congress faced the same tax issues and the IRS had to work to update new tax laws for the 2010 tax filing year. The updates caused a delay in tax filing for over 9 million taxpayers.
The reason for the delay is due to the changes in the alternative minimum tax laws according to HLNtv.
The Alternative Minimum Tax (AMT) which limits deductions above a certain income level. It was originally designed to ensure that people with higher incomes paid at least some tax. But the income exemption wasn't indexed for inflation, so Congress has had to pass annual "patches" to make sure the AMT doesn't creep into lower tax brackets.
The last patch expired at the end of 2011, and there wasn't one passed for 2012. So, the permanent AMT fix included in the fiscal cliff deal will apply retroactively to 2012, an IRS spokesman told HLN. That spares millions of people who otherwise would have been subject to the AMT. But the IRS has to update its forms and processes for the new income exemption.
The delay in filing income tax returns early will likely cause controversy among taxpayers who are expecting income tax refunds. Typically those who know they are getting a return from the IRS file taxes as soon as possible. However, with the current system changes it's not clear just when taxpayers will be able to file their 2012 returns.
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