Fiscal Cliff Hits 2012

I have had people say to me: The fiscal cliff items are really all 2013, aren't they? The answer is that they are not. There are a number of items that changed 2012 retroactively, and thus the delay in our ability to file our tax returns (again) this year. Here's a list of 2012 items:

Individual Items

• Direct contributions to charity from an IRA is not treated as income, not deductible, but satisfies the RMD [IRC §408(d)]
• Option to deduct state sales tax instead of state income tax [IRC §164(b)(5)]
• Reduction in income for college tuition and related expenses paid [IRC §222]
• Educator expenses up to $250 [IRC §62(a)(2)(D)]
• Mortgage insurance premium treated as mortgage interest (potentially allowing it to be deducted from income) [IRC §163(h)]
• Higher limits for excluding income from employers for mass-transit and parking benefits [IRC §132(f)]
• Contributions of qualified real property to an organization for the purposes of conservation [IRC §170(b)(1)(E)]
• Treatment of certain dividends on regulated investment companies (e.g., mutual funds) for nonresident alien individuals [IRC §871(k)]

Business Items

• Restored ability to directly expense capital expenditures back to $500,000 [IRC §179]
• Changes can be made to an election to use IRC §179 on a timely-filed amended return
• Off-the-shelf software can be expensed under IRC §179
• Allows use of IRC §179 up to $250,000 for qualified real property including [IRC §179(f)(1)]:
  • Qualified leasehold improvements defined under IRC §168(e)(6)
  • Qualified restaurant property defined under IRC §168(e)(7)
  • Qualified retail improvement property defined under IRC §168(e)(8)
• Extends the period for acquisition of certain qualified small business stock that will have capital gains excluded if held 5 years (does not directly affect 2012 tax returns) [IRC §1202]
• Rules for adjusting basis of stock in a Sub-chapter S corporation related to charitable contributions [IRC §1367(a)(2)]
• Indian employment credit [IRC §45A]
• New markets tax credit [IRC §45D]
• Railroad track maintenance credit [IRC §45G]
• Mine rescue team training credit [IRC §45N]
• Employer wage credit for employees who are active duty members of the uniformed services [IRC §45P]
• Work opportunity tax credit (for non-veterans) [IRC §51]
• Qualified zone academy bonds [IRC §54E]
• Accelerated depreciation for business property on Indian reservations [IRC §168(j)]
• Enhanced charitable deduction for contributions of food inventory [IRC §170(e)]
• Election to expense advanced mine safety equipment [IRC §179E]
• Election for special expensing of certain qualified film and television productions [IRC §181]
• Deduction for specific income related to domestic production activities in Puerto Rico [IRC §199(d)]
• Modification of the tax treatment for certain payments received from controlled entities as it relates to unrelated business taxation [IRC §512(b)(13)]
• Regulated investment company qualified investment entity treatment under the Foreign Investment in Real Property Act [IRC §897(h)]
• Extension of exception for active financing income [IRC §953(e)]
• Treatment of payments between related foreign corporations [IRC §954]
• Empowerment Zone tax incentives [IRC §1391]
• Tax-exempt financing for the New York Liberty Zone [IRC §1400L]
• Temporary increase in limits related to the rum excise tax for Puerto Rico and the Virgin Islands [IRC §7652(f)]
• Extensions related to the American Samoa economic development credit

Whew! Most of these affect very few of us, but certainly they are important to those they do affect and these are viewed by Congress as important for the continued economic recovery. But with a list this long is it any wonder that the IRS will not be able to accept tax returns until the end of January for most returns and late February or early March for some returns?