Tax planning hasn't been a cinch since tax laws started undergoing sea changes with every change of parties in Washington. But it's become almost impossible with two polarized parties sharing near equal power and not giving an inch.
Tax preparers share their own outlooks by way of counsel.
"I don't expect a lot of tax reduction bills or tax increase bills unless there's a lot of compromise," said Scott Kadrlik, a CPA and managing partner at Meuwissen, Flygare, Kadrlik & Associates, in Eden Prairie, Minnesota. "Nothing substantial has been done to extend legislation that previously passed. We could end up filing amended returns to deal with their delays."
"It's a waste of time to expect anything to get accomplished by this Congress when they [couldn't] even select a speaker," said Robert Seltzer, a CPA at Seltzer Business Management in Los Angeles. "It shows how compromise just isn't in the mindset of the extreme factions of the parties."
'Muddy'
"Us-vs.-them" seems to be the only unanimous feeling in Washington these days:
- Many of the tax proposals in the American Institute of CPAs'
recent list to Capitol Hill , for instance, face the same rough chances of passing as any significant tax law change when Republicans and Democrats control separate chambers. - President Biden
proposed tax increases on investors and top-earning Americans in his annual budget request to Congress. The proposals will be immediately rejected by congressional Republicans. - Division figured in even bipartisan support in the Senate's recent confirmation of Daniel Werfel as the new Internal Revenue Service commissioner: Six Republicans voted
to support Werfel's nomination and one Democrat, Joe Manchin of West Virginia, voted against the nomination because of a dispute over tax credits with the Biden administration.
Headline grabbers from Washington may never make it onto clients' returns but may still weigh on clients' minds. Some congressional Republicans, for example, have advocated eliminating not just major recent IRS funding but the IRS itself, replacing the national income tax with a national sales tax.
Republican conservatives in the House Freedom Caucus
"I always caution clients to wait for the end result," said Jeff Gentner, an enrolled agent at Gentner Tax Associates, in Williamsville, New York. "Lots of things are thrown around during negotiations in Congress. If something is proposed, people start to think it is passed when it is just up for discussion. I tell my clients that I do not even look at the proposals but wait until something gets passed before focusing on it. Otherwise, it gets all muddy."
TCJA certainty?
Some preparers are especially advising that clients see what happens with the potential 2026 sunset of provisions of the Tax Cut and Jobs Act. The biggest potential impacts — if Congress doesn't renewing the provisions — include a higher top income tax rate, the end of a valuable business-income deduction, alterations to itemizing deductions and generally higher estate taxes.
"Any new legislation that might occur will pretty much have to be bipartisan at least until 2025, when the 2024 elections come into play," said Brian Stoner, a CPA in Burbank, California. "Most other items probably don't have the votes to pass."
Wait-and-see was the watchword for planning
"[We're] trying to persuade them to hold tight and not sell everything with the market so low. Patience is the watchword," said Terri Ryman, an EA with Southwest Tax & Accounting in Elkhart, Kansas. "So many folks have wanted to take out their 401(k) money so it doesn't go any lower — which seems like a really bad idea."
