Can't file your return until the forms (and the calculations) are ready. Turbo Tax doesn't want to expose itself to audits and refilings, so they wait:
Some TurboTax customers are mad at Intuit, maker of the popular tax-prep software, because they've finished their returns but are unable to file. Their anger is misplaced. They should blame the Internal Revenue Service, along with the 111th Congress and President Obama for enacting and signing the tax increase with which TurboTax can't yet comply. (They could also blame George W. Bush if they're in a jocose frame of mind.)
At issue is ObamaCare's new 3.8% "net investment income tax." It took effect Jan. 1, 2013, so that taxpayers are encountering it just now as they prepare their returns for last year. In effect, it applies the Medicare payroll tax to interest, dividends and capital gains.
But it doesn't apply to all such income. If your modified adjusted gross income is under $200,000 (or $250,000 for a married couple), you don't pay the tax at all. Further, if your modified AGI is above the threshold but your noninvestment income is below it, the tax is applied on the difference between your total income and the threshold.
If that's hard to follow, here's an example: Suppose you're an unmarried taxpayer with a modified AGI of $210,000 and investment income of $20,000. Your net investment income is $10,000, the portion of your investment income above the total income threshold of $200,000. Your net investment income tax is 3.8% of this sum, or $380.
If you owe net investment income, you have to complete a single-page Form 8960 to calculate your modified AGI and the tax. But the form's brevity belies the new tax's complexity, as tax expert Tony Nitti wrote in a Forbes.com piece last month:
When we saw that this new, complex area of the law would ultimately be computed on a one-page form, we anticipated that the meat of the computation would be done off-form in worksheets provided by the instructions. And that's exactly what happened. But that shifts the onus back to us as tax advisors to make sure our inputs are correct, which means we must understand the nuances of the final regulations.
Nitti wrote that Jan. 7, the day after the IRS released its instructions for Form 8960. But those instructions are not final; they include a cover sheet that warns: "DRAFT--NOT FOR FILING." Taxpayers, tax advisers and tax-prep software developers are still awaiting the final instructions.
Hence the TurboTax users' frustration. "Form 8960 was realeased [sic] by the IRS on 1/24/14 but Turbo Tax keeps delaying it's [sic] release every week, for another week!" a user complained last week on Intuit's TurboTax AnswerXchange online forum. "I'm calling BS on this as they have had access to the draft form for months! When is TT actually going to make this form available and stop extending the dates? And why should we keep waiting for this form when other providers already have it available?"
Actually, Intuit has incorporated the form into its software. But for the moment, it won't allow users to complete a return that includes an 8960. An AnswerXchange moderator answers the query by explaining that in response to complaints from users--some of whom have switched to other tax-prep software to get the job done--"we will enable the filing of Form 8960 late on Feb. 26 (or possibly early the next morning) based on draft instructions."
But the moderator warns: "If you make the decision to file now, you may need to amend your return if the final instructions produce a tax liability different than the liability computed using draft instructions. You assume responsibility for checking for product updates to determine if the final instructions require an amended return and for paying any additional tax and interest."
But WAMK, I'm not one of those Super Rich that have an AGI over $200k. Big deal! If you think the $200k threshold won't be dropping year over year, I've got some lovely land to sell you in Florida.
As unemployment stays high, more people receive benefits, and Obamacare continues to not live up to expectations, more money will have to be thrown at it. That money will come from those that have jobs, and the pool will be made wider to get as much as possible.
In other words, you're next.