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'Tax Cliff' already here, says Westminster, Colo.-based CPA

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The federal government’s inability to resolve its impending budget crisis, called the “fiscal cliff,” has already had permanent consequences on people who typically submit their tax returns early, according to a video produced by Fran Coet of Westminster, Colo.-based Coet2 CPAs P.C.
The “fiscal cliff” is due to arrive at the end of 2012, but Coet says in some cases, the damage is already done.
“Here we are, with no time left for any kind of intelligent planning, no time to set into motion all the changes that we need to make for any kind of reasonable processing of tax returns, and no hope of getting tax refunds to the people who expect them and need them the most,” she said.
She adds, “Right now, we are still waiting to know what kinds of forms we will need for tax returns, and what they will look like!”
Those tax forms are based on the most current tax legislation; and right now, that legislation is unclear. The IRS has already announced that it will delay the processing of tax returns by at least 11 days this year to accommodate the time required to print new forms. And yes, Coet says, for some people this is a big deal.
“People who previously relied on mid-January tax refunds for things like payment of their rent, now have to figure out how to get through that period,” she says. “The IRS recently announced that the average completion of refund claims (from the time the return is transmitted until the refund is deposited) will be extended to 21 days, instead of the previous “two weeks or less” turnaround. Additionally, businesses that normally market toward those early refunds (e.g. offering “tax-refund” sales) will now have to wait.
So what can people do?
First, people should assume that taxes will go up, she says. Some of the likely targets include exclusions on pension contributions, exclusions on employer-provided health coverage, deductions for interest on home mortgage, and estate and gift taxes. Also, she says, long-term unemployment benefits are likely to revert to their previous (shorter) 26-week periods.
Coet also advises clients to consider “accelerating income” into this year, when that income is likely to be taxed at more favorable rates. That means, if you have an asset that you have been thinking of selling, and there is a large capital gain involved, then make that sale now, rather than in 2013.

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