Tax planning has always had its challenges, but those challenges are exacerbated by the polarized climate in Washington, some professionals told Accounting Today.
Two perspectives summed up the despair.
"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, Minn. "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."
Other issues illustrate the challenges of getting anything done in the current Congress, such as: the “rough chances” of passing any of the tax legislative proposals the American Institute of CPAs (AICPA) submitted; the immediate rejection of President Biden’s proposed budget by congressional Republicans; and the less-than-unanimous (54-42) vote to confirm Daniel Werfel as the new IRS commissioner, despite bipartisan praise for him during his confirmation hearing.
Some congressional Republicans want to eliminate IRS funding allocated under the Inflation Reduction Act, and even the IRS itself. Some are also demanding trillions of dollars in spending cuts in exchange for voting to raise the debt ceiling to prevent a default.
"I always caution clients to wait for the end result," said Jeff Gentner, an enrolled agent at Gentner Tax Associates, in Williamsville, N.Y. "Lots of things are thrown around during negotiations in Congress…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."
With certain provisions the 2017 Tax Cut and Jobs Act (TCJA) set to expire in 2026, some preparers are advising clients of potential impacts, such as 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, Calif. "Most other items probably don't have the votes to pass."
Some advised watching and waiting to see what happens.
"[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 enrolled agent with Southwest Tax & Accounting in Elkhart, Kan. "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."