Tax Planning in an Era of Uncertainty

There are many factors contributing to tax uncertainty at this time. For individuals and tax practitioners alike, planning over the next several years is going to be challenging, to say the least, because of this uncertainty. Still, working within the framework of what is known can produce tax savings for those who take appropriate action. Understand the forces at work and the opportunities available now.

Contributing to Uncertainty

There are several pieces of legislation that intersect, resulting in some tax provisions expiring, some taking effect, and others simply unknown:

• The Budget Control Act of 2011 (P.L. 112-25), enacted in August to save the country from default, could result in changes from the bipartisan joint committee authorized to raise $1.5 trillion over 10 years. What these changes might be is entirely unknown at this time. Proposals are scheduled to be voted on in Congress before the end of this year.

• A jobs bill, following the President’s plan for job creation, could introduce new tax incentives for employers. Again, what these changes might be, when they would take effect, and how long they would run, is also unknown. The President proposes, but it is up to Congress to enact.

• About two dozen tax provisions affecting individuals and businesses, which were extended temporarily by the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (P.L. 111-312), are set to expire at the end of 2011.

• Core provisions, including income tax rates, estate and gift tax rules, and other rules under the so-called Bush tax cuts, which were also extended temporarily by the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (P.L. 111-312), are scheduled to expire at the end of 2012.

• Several tax increases are set to begin in 2013 under the Patient Protection and Affordable Care Act of 2010 (PPACA) (P.L. 111-148), but constitutional challenges to this law may undo scheduled tax hikes.