Is year-end tax legislation still coming?


October comes to a quick close this week and with that we all find ourselves with few business days left in 2023. As the year end approaches and Congress is in various states of disorganization, many tax practitioners are wondering whether last minute tax legislation is still coming.

The current state of affairs in Congress include a new Speaker of the House and also a Federal budget that expires on Nov. 17, which resurfaces the fears of a Federal shutdown. The new speaker has already made it clear that a passed budget would be coming with strings attached, but we don’t know how many of those strings have tax consequences yet.

As of right now, many of the individual tax provisions that are currently set to expire after next year are being discussed, including the enhanced child tax credit which Johnson wants to see restored.

Additionally, Republicans are looking to see the deduction of research and development expenses restored to 100% and to see the limit on SALT tax deductions removed.

The lack of new legislation should make things slightly easier on preparers this year. Hopefully, it should also mean an earlier start to the filing season. Historically, in years where legislation was passed close to year end, the filing season was delayed due to forms not being approved or available in tax preparation software yet.

Delays contribute to a backlog of returns and after multiple years of very challenging tax seasons practitioners are feeling overdue for one to go off without too many hitches.

While we may not have to contend with too many new laws, there are straggling issues that practitioners will still be addressing well into 2024. The mess that is the ERTC credit is going to be hanging around for a while. Legitimate claims are being disallowed from filing at the moment while the IRS wades through the backlog in an attempt to kick out an egregious number of fraudulent claims.

The issues and questions surrounding 1099-K changes have also not been addressed. The 1099 changes were delayed last year after the IRS failed to issue any guidance related to the changes. Starting with payments made in 2023, payment processors will now be required to issue a 1099-K to anyone who received $600 or more in payments.

This includes payments for personal items, such as reimbursing your friend for coffee. That means that your individual tax clients would have to report numerous 1099s for funds they transferred between family and friends. The current recommendation is not to forgo reporting these, but instead to include an adjustment on Schedule 1 Part II, Line 24z to offset any funds that were received for reimbursement or of a personal nature.

The moral of the story is we can’t rule out a complex tax season just yet. Even though it seems like we might have a reprieve from last minute changes, it is difficult to say exactly what will happen with the Federal budget over the coming weeks that could rock the tax practitioner boats.

Both the Senate and the House are in session until Dec. 14, keep your life vests on until then.

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