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As the lame-duck session of Congress officially begins, one of the top issues for lawmakers will be taxes--particularly whether to extend the Bush tax cuts, but also dealing with the Alternative Minimum Tax (AMT) as well as repealing a Form 1099 income reporting requirement for small businesses.
In the absence of compromise, all of the Bush tax cuts will expire come January 1. Republicans favor extending the Bush tax cuts while the Obama Administration’s stance is that middle class tax cuts should be extended indefinitely but higher income taxpayers should be given no permanent tax cut extension.
David Kelly, chief market strategist for J.P. Morgan Asset Management, says that the “most obvious compromise” would be a permanent extension of the middle-class tax cuts and a two-year extension of the tax cuts for upper income individuals. This way, he says, “If the Republicans win the White House and a Senate majority in 2012, they will be in a strong position to make the upper–income tax cuts permanent.” But, either way, he continues, “while the political temperature may rise, the probability is that a few months from now, if not a few weeks from now, all or most of the Bush tax cuts will be extended, removing a potential roadblock to continued economic recovery.”
Other measures are in the works to deal with the dreaded AMT as well repealing requirements for small businesses to file 1099 tax forms starting in 2012.
A bipartisan group of tax leaders in Congress, including Senate Finance Committee Chairman Max Baucus, D-Mont., have already vowed to “do everything possible” to enact 2010 AMT relief. Baucus and other leaders of the Congressional tax-writing committees told IRS Commissioner Doug Shulman in a Nov. 9 letter that they will “work to craft the AMT provision so that, in the aggregate, not one additional taxpayer faces higher taxes in 2010 due to the onerous AMT. Such legislation will allow the personal credits against the AMT and the exemption amounts for 2010 to be set at $47,450 for individuals and $72,450 for married taxpayers filing jointly.”
Baucus announced Nov. 12 that his committee is also working on legislation—and may introduce it as early as the week of Nov. 15—that would repeal a requirement beginning in 2012 that small businesses must file 1099 tax forms reporting payments made for goods and services. The policy officially became law in early 2010, but Baucus says that “more business owners became aware of the new paperwork requirements and raised concerns about the resources” required to comply with the new law come January 2012, when the forms are to be completed. Baucus said he has decided to introduce legislation to repeal the reporting requirements “after recent consultation with small business owners in Montana and across the country.”