It has been said many times and by many people recently that democracy, true democracy, is a very messy and ugly process, which is a good way to describe the recent fiscal cliff debates. Despite opinions on whether the bill is good or bad, the American Tax Relief Act of 2012 truly is a very good thing for most taxpayers.
Here's why; if we look at the bill from a taxpayer's perspective:
- It reinstates many tax benefits that had expired and were gone for 2012. With these benefits back, taxpayers are able to reduce taxes and make their 2012 tax refunds larger than they would have been if the bill didn't pass. More refund money for taxpayers is a good thing.
- Renewed benefits include the "extender" provisions such as: tuition and fees deduction, sales tax deduction, private mortgage insurance deduction, teacher's deduction for classroom expenses, the energy credit for home improvements and a permanent alternative minimum tax patch. Fixing and renewing tax deductions and benefits that millions of taxpayers use every year is a good thing.
- The first day for e-file and paper return acceptance should start on time -- Jan. 22, 2013. This is still subject to IRS clarification in the coming hours as they too review the details of the bill. But for now, tens of millions of taxpayers can likely file on time, in January and February, as they planned and get their refunds. This is a good thing.
- Refunds should also come on time, similar to last year, in under 21 days and for many taxpayers much faster than that. Taxpayers getting their much-needed refund early and about as fast as last year is a very good thing.
What else should taxpayers be aware of with the new tax law changes? Well, the late and comprehensive tax law changes are still a very confusing issue, with many short and long term changes. Even though the main issues for 2012 were resolved (namely the "extender" provisions and the AMT patch), the bill contains a great deal more that will impact many taxpayers, and they will need to be very aware of the rules (as will their preparers) and understand all the implications to this law change. Blind reliance on software will increase risk of an error or overlooked tax benefits left off of tax returns.
With the "cliff" avoided, comprehensive tax law change passed for 2012 and beyond, tax season 2013 is almost ready to go. This year may be more important than any recent year to start getting your taxes prepared early, filed as soon as possible, and getting that big refund. Why? Several reasons:
- The law is now fixed for 2012. No real reason to wait to get your taxes done and get your refund -- near 60 million taxpayers file before end of February each year and most get a refund.
- Like last year, we expect 75 percent of taxpayers will get a refund, and this year's refunds should average around $3,000 like last year.
- ID theft and refund crimes are growing. Filing early helps protect you from abuse by locking out the bad guys.
Although it was a messy end to the tax changes process with late legislation, for now it is over and tax season is here. So gear up, get ready, get your paperwork together and file your tax return early, and get that big refund.