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http://articles.moneycentral.msn.com/News/CongressScrewUpMayCostUsABundle.aspx
Congress' inaction may cost us a bundle
Lawmakers failed to renew a number of popular tax breaks before they went off to campaign for re-election. Remember that when you go to vote. By Jeff Schnepper I am really ticked off at Congress. You should be, too. It looks like political gaming has cost you and millions of other taxpayers a lot of money. A number of tax-saving provisions have expired, and members of Congress messed up and didn't extend them before their recent adjournment. They wanted to. They said so. Many times. But they didn't get the job done. What's lost to failed tax bills include a deduction for schoolteachers who pay for their own supplies, a deduction for college tuition and expenses for families that don't qualify for certain education credits, and a research-and-development tax credit popular with business. About 19 million individual taxpayers could be affected by the nitwits' inaction. (I'm sorry, but that's how mad I am.) It's possible -- and I hope it happens -- that Congress will return to Washington after the November election and fix the mess. But don't bet on it. The Internal Revenue Service expects to start printing tax forms for 2006 returns starting in early November. Changing the tax code after the print run may cause too much confusion. What Congress hath taken away Here's what looks like may be gone: * Deductions for teachers' out-of-pocket expenses. This is worth $250 for America's teachers. * Deductions for college tuition and fees. This has allowed up to $4,000 a year in deductions for parents of college students who don't qualify for the Hope or Lifetime Learning tax credit. * Deductions for contributions to Archer medical savings accounts. These accounts are designed to help people save money for future medical expenses. About a half-million taxpayers have used these. * Deductions for state and local sales taxes. This affects residents of Alaska, Florida, New Hampshire, Nevada, South Dakota, Tennessee, Texas, Washington and Wyoming who pay no personal state income tax (New Hampshire and Tennessee do tax dividend and interest income). This has been worth billions of dollars in deductions for residents of these states. Business lost out, too While individuals are getting hosed, so are businesses. Here are some business tax credits that are out, at least for now: * Corporate Research and Development Tax Credit. This is an important credit for businesses. * Work Opportunity Tax Credit. This has provided a 25% credit on the first $6,000 in wages paid to workers who worked at least 120 hours but less than 400 hours a year. It bumped up to 40% for workers who had worked at least 400 hours in their first year. * Welfare to Work Tax Credit. This has provided a credit of 35% of the first $10,000 of qualified wages paid in the first year of employment and a 50% credit on the first $10,000 of qualified wages paid in the second year of employment. * New Markets Tax Credit. This has provided a tax credit to people who invested in qualified funds that spurred economic development in low-income communities. * Possession Tax Credit. This is one of those lovely tax breaks that has affected a very few taxpayers. In this case, the nonrenewal affects the two companies that operate tuna canneries in American Samoa. They had lobbied successfully for this break to preserve jobs in the South Pacific. But that's not all. Business is losing deductions for: * Corporate contributions of computer technology. * Costs of brownfield remediation. * Investment in oil and gas production from marginal wells. * Accelerated depreciation for property on Native American reservations, leasehold improvements and restaurant improvements. These provisions were originally made temporary for two reasons: to evaluate their effectiveness and to minimize the projected deficit hit at the time of passage. Historically, only one extender -- the corporate deduction for group legal services provided to employees -- has been allowed to expire in the past 25 years. Both Republicans and Democrats agree that the tax provisions should have been extended. But instead of doing the right thing, Congress played a game of chicken. The Republicans conditioned the extensions on a repeal of the estate tax. Indeed, Senate Majority Leader Bill Frist, R-Tenn., wouldn't allow the provisions to come up for a vote unless tied to an elimination of the estate tax. The Democrats oppose the estate-tax elimination and wouldn't agree to the deal. Maybe we will all get a break and Congress will stop fooling around and pass these extenders. Here's where I recommend you be patient when you do your taxes. The tax forms may not reflect the tax changes. The Internal Revenue Service could be buried with additional training, telephone assistance, delayed refunds and amended filings. Paperwork, IRS publications, forms and Web sites would all have to be amended. Software programmers and developers would have to update their programs, including the ones used for electronic tax-return filing. I have a personal stake in this issue. The latest edition of my book "How to Pay Zero Taxes" would be out of date before even printed. The House of Representatives is scheduled to return to the Capitol on Nov. 13 for unfinished business. Note, that's after the Nov. 7 due date for printing the forms. Lawmakers plan to work until the Thanksgiving recess and return again in December if necessary. This year's lame-duck session will mark the fifth consecutive time that Congress has needed to return to work after the election. Maybe the extenders will be passed, delivering us to a tax season of mass confusion. It may be worth remembering when you vote.
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