Dozens of tax breaks expired in 2013, but can still be extended for 2014 and beyond if Congress takes action before December 31 of this year. There is hope that Congress will at least extend many of the major tax breaks. Congress will be looking at tax breaks which impact both taxpayers and businesses.
The decision to extend expired tax breaks got postponed after the President issued a veto threat. The House is now expected to vote to extend certain tax breaks for one more year as early as this week. A permanent extension is unlikely.
Major alterations are hanging in the air due to the delay in reviving tax breaks. The IRS will make adjustments to accommodate the extensions after Congress reaches a decision. The sooner a determination is made, the more time the IRS will have in making preparations for the rapidly approaching tax season. If Congress does not reach a decision soon, the IRS has warned that there might be a delay in the start of the 2015 tax season, and the issuing of refunds.
Businesses and individual taxpayers are also awaiting a decision. They will need to make changes in their tax calculations and return preparation for 2014 after they know which tax credits and deductions they can claim.
Senate Democrats and House Republicans are considering making certain tax breaks permanent, though the decision may not be made this year. It is likely that Congress will extend some of the tax breaks for a year. Even though a one-year extension may seem convenient at present, it is believed that this can have damaging fiscal consequences. Businesses complain that they find it difficult to create long-term tax strategies if tax breaks keep expiring every year or two.
Additionally, one-year extensions may also create tax uncertainty next year. Instead of short-term extensions, Congress needs to take action that will provide certainty and stability.