Ohio business and individual taxpayers, as well as their tax professionals, faced a great amount of uncertainty in 2010 as they waited to see what tax rules would apply to them for 2011 and 2012, until the 2010 Tax Relief Act was signed into law in December. Now, the recently approved debt ceiling legislation averted another immediate crisis, but continued this guessing game as Americans wait to see if comprehensive tax reform will be accomplished.
As part of the debt ceiling agreement, a Congressional super committee will review and make recommendations for reforming the tax system. However, the committee must first agree on the reform measures, and even if they do, the measures are not likely to begin to go into effect until 2013.
In the meantime, Congress must still address a host of tax breaks that will expire at the end of 2011 under current law. These include the research credit, the work opportunity tax credit, and the above-the-line deduction for qualified tuition and related expenses. The alternative minimum tax exemptions and ability to offset AMT with personal credits also expire at the end of this year. If the super committee is unable to make recommendations or if Congress does not pass them, we may see extenders being considered in late 2011 or early 2012.
In addition to these shorter term tax issues, Congress must also debate whether to extend the Bush-era tax cuts that are scheduled to expire at the end of 2012 under current law. If the debt ceiling debate is any indication, this will be a messy process.
All of these issues mean long-term tax planning will remain uncertain for some time to come. If you have questions about how these tax law issues may impact you, please talk to your tax professional. Unfortunately, there is no crystal ball, and we must maintain flexibility in any tax planning we do undertake. As always, we will report on the tax law changes and their implications as they occur.