Tax Predictions for 2013

It’s time for me to make my tax predictions for 2013. Last year, I made 6 predictions. This year, there’s only 3:

1. No tax reform at all in 2013.

It looks like the “fiscal cliff” bill Congress passed extends almost all major tax provisions at least 2 years, and in some cases 4 years, so we won’t see tax reform or tax simplification this year, and probably not at all during the rest of the Obama administration.

2. Some sort of gimmick tax break will be enacted to make up for the payroll tax holiday expiring.

I don’t think a lot of folks have grasped that the payroll tax holiday went away 1/1/13. For a person making $40,000/year, this means an $800 decrease in take-home pay in 2013 compared to what people had been used to while the 2% reduction “holiday” was in effect in 2011 and 2012.

While Congress allowed the holiday to expire, I am convinced they’ll replace it with something. My bet is on a revival of the “Making Work Pay Credit.” The only thing I’m not sure of is if the credit will be paid as a lump-sum rebate check, or if it will be paid bit-by-bit through a reduction in income tax withholding.

3. The IRS won’t extend the RTRP testing deadline.

The deadline for unlicensed tax preparers to take the minimum competency exam (the RTRP exam) is December 31, 2013. As of December 2012 there were approximately 300,000 people who still had to take the exam. If they don’t pass the test by the end of 2013, they’ll be forced out of the tax prep business.

Given these numbers, will the IRS extend the deadline? For a long time, I had thought that yes, they would. But now, I think the answer is no, they won’t.

I agree with fellow Enrolled Agent David Fazio, who said (and I’m paraphrasing) in a comment to this blog post, that the IRS would lose authority if it extends the deadline. The IRS would look ineffective and it would give the appearance that people can just ignore the rules and the IRS will cave in.

And even though I don’t really support this whole preparer regulation thing, I don’t weep for the unenrolled who haven’t taken the exam. It’s an open-book test over Publication 17, for crying out loud. And the test and the 12/31/13 deadline have been known about for a long time.

As always, my December 31, 2013, blog post will be a review of how accurate my predictions were.