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Anne Powelson Anne Powelson
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Predictions for tax season

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How will tax filing go this winter? I took out my trusty magic eight ball to help predict what will happen with the upcoming tax season.

Question: Several sections of the tax code expired Dec. 31, 2013; will they be extended for use on 2014 tax forms?

Answer: Outlook good.

In the news, these expired provisions are often called 'extenders,' but I like to think of them as zombie provisions, because they have expired several times over the past 10 years, and each time they have been resurrected. This year there are over 60 extender provisions, including Educator Expenses, Tuition Deduction, Residential Energy Credits for insulation and efficient energy appliances, and an expanded Section 179 allowance. (Expanding the Section 179 allowance gives businesses the opportunity to write off more of their new purchases in a single year, rather than depreciating them over time.)

Question: Will refunds be bigger this year?

Answer: Signs point to yes.

As of April of 2014, with 73 million refunds issued, the average refund was $2,831. In 2015, the numbers are likely to be slightly bigger. Inflation has increased the maximum Earned Income Credit to $6,044, the maximum Child Tax Credit remains at $1,000 per child and with the American Opportunity Credit still available for college students, there will be some large refunds.

Question: Will tax returns begin being processed on schedule?

Answer: Don't count on it.

The IRS is currently scheduled to begin processing filed on Jan. 16. Last January there was a delay to the start of the season due to the sequestration earlier in the year. In 2013, the season started later because the tax extenders were extended at the last minute. In 2012, acceptance of returns was delayed for filers who itemized, again because of last minute changes in the tax code. It takes time for the IRS to respond to changes in the tax code. If there is an extension of the expired provisions, some tax returns may be delayed. But any delays will be brief; articles declaring 2014 refunds will be delayed until October 2015 are hoaxes.

Question: Will there be challenges with the Affordable Care Act?

Answer: It is certain.

For the majority of taxpayers, the only change this year will be verifying full-year coverage. However, some will need to reconcile Advance Premium Credits received to help pay for health insurance purchased through the marketplace. Others will need to review the exemptions or calculate their penalty.

I hope the tax season will go smoothly, but the 2014 tax season will be a learning period. Forms have been added to reconcile Advance Premium Tax Credits and to calculate, or claim exemption from, the Individual Responsibility Payment. Most taxpayers affected will wind up completing tax forms after the Health Insurance Marketplace has closed, so if you think you have an exemption, or need insurance, you can benefit by asking your questions now. Just don't rely on your magic eight ball for answers.

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