Relieved to have survived another tax season? Brace yourself, because if IRS Commissioner Douglas Shulman is to be believed, the worst is yet to come. Shulman recently warned the press that next year could be a “real disaster” if some tough decisions aren’t made before Jan. 1.
For starters, President George W. Bush’s 2001 and 2003 tax cuts—the ones that gave a modest break to the under-$250,000-a-year crowd while paving the way for the Romneys and Buffetts of the world to pay less in dividend and investment taxes—are set to expire at the end of 2012. Also at issue is the Social Security payroll tax cut; the 4.2 percent rate will climb to 6.2 percent by the end of the year.
And lest we forget the alternative minimum tax (AMT) patch extension: The AMT was created originally to keep the very wealthy from excessive deductions and exemption abuses. Inflation through the years has had AMT income targets edging closer to the middle-class taxpayer’s ranges. Each year, adjustments, or patches, to the 1969 law are made in the 11th hour as the IRS prepares forms for the coming year. These patches have allowed millions of Americans and more than 100,000 Nevadans to avoid tax bills that some say could be between $3,900 and $8,000 higher this year.
Here’s the bad news: There’s no new patch yet—it ought to be an easy decision for Congress. But it seems there’s no such thing anymore.