What to Do Now That 2017 Tax Extenders Have Finally Passed

It is February 9, 2018, the snow is falling, and we are in the midst of a very busy 2018 tax season that just keeps getting more interesting. This morning President Trump signed a budget bill that was written to keep the federal government’s lights on until March 23. It seems that "long-term" for Washington these days is about 6 to 7 weeks.

This budget bill includes the annual “tax extenders” for good measure. Many tax-related items that expired on 12/31/2016 are now retroactively extended for at least a year, some longer. You read that correctly. Items that had expired at the end of 2016 are now retroactively extended and impact 2017 income tax returns, some of which may have already been filed! Perhaps it pays to procrastinate?

Somewhere in the commentary of this budget and tax extender bill, there is mention of wanting to do this “early” so that the IRS has time to process returns for 2017. If this is “early”, I don’t want to see late! I’d like to take this opportunity to express my sincere thanks to the federal government for keeping it interesting and awesome this year. In their official statement, the IRS expressed similar feelings:

The IRS is reviewing the legislation signed Feb. 9 that retroactively extended and modified numerous tax provisions covering 2017. We are assessing these significant changes in the tax law and beginning to determine next steps. The IRS will provide additional information as quickly as possible for affected taxpayers and the tax community.

The bill includes some relief and provisions for donations made related to the California wildfires, hurricanes and other natural disasters that occurred during 2017. It also includes some more obscure provisions for attorneys fees relating to awards to whistleblowers and a production credit for Indian coal facilities. The provisions that will most likely impact individual taxpayers include extensions for:

• Exclusion from gross income of discharge of qualified principal residence indebtedness
• Mortgage insurance premiums treated as qualified residence interest
• Above-the-line deduction for qualified tuition and related expenses
• Credit for nonbusiness energy property
• Credit for residential energy property
• Credit for new qualified fuel cell motor vehicles
• Credit for alternative fuel vehicle refueling property
• Credit for 2-wheeled plug-in electric vehicles

You can find a list of all of the extended tax provisions in the H.R.1892 - Bipartisan Budget Act of 2018 document beginning at Section 40101.

Next Steps

If you've already filed your 2017 tax return and think you might be affected by the tax extender provisions, here are your next steps:

1. Crunch some numbers. Before you start digging through that shoe box to find old receipts, make sure that you're affected by the extenders and haven't been phased out by income or other restrictions. Your Kruggel Lawton tax professional will be able to help.
2. Amend your tax return. Don't file a second 1040. Instead, you'll want to amend your tax return by using form 1040X - Amended U.S. Individual Income Tax Return.
3. Don't be in too much of a hurry. The IRS was caught off-guard by this announcement so they will be putting in overtime to update forms and come up with a plan. If you do end up amending your return, the 1040X can take a few weeks to make it in to the IRS system and then another 16 weeks max for processing. To kill some time, maybe you can take a moment to let your representatives in Congress know how you feel about this whole situation. You can find out how to contact your specific representatives for Senate and the House by clicking the "Contact Your Member" button in the upper right hand corner of the Congress.gov page.

Mike Varner, CPA
Tax Partner
mvarner@klcpas.com | 574.264.2247 x305