Biggest Tax Blunder of 2010

So now that the 2009 Tax Season is finally over  (for those who don’t follow things like this, October 15^th is when the IRS extension period ends) the New York Times Freakonomics blog decided to ask the question --  "What is the biggest tax blunder of the year?"  (They actually asked it in a more open ended manner.  They apparently are focusing on the fact that 2010 still isn’t over, and we could get more potential blunders before 12/31.)  The big winner was:   not addressing tax issues that impact 2010.  Most specifically the AMT patch (or lack thereof), the elimination of the Federal estate tax and the expiration of research and development tax credits.  According to Tax Vox continued inaction on AMT means that 27 million taxpayers will fall into the Alternative Minimum Tax category in 2010.  That’s a 23 million taxpayer increase from 2009.  Perhaps not as important, but certainly worth noting is that also going away will be the option to take an itemized deduction for state and local sales tax  vs. income taxes paid to the same entities.  The addition to the standard deduction for state and local real property taxes also is gone in 2010.  The above the line deduction for qualified educational expenses and the $250 teachers get for purchasing supplies for their classrooms are also not continuing (at this point).  So the list is long, and it is one of those things that while each item isn’t make or break, arguably in aggregate it is the biggest blunder of the year.

Then again, there’s so much competition.  Presumably allowing the Bush tax cuts to expire without any fine tuning would count as a 2010 event, and easily gets classified as a blunder.  (Ironically there are many smart people who see this not as a blunder, but an accomplishment.)  Then there’s the horrid implementation of the home buyer tax credit and associated extensions.  Speaking from personal experience, no one (including the IRS) knew exactly how to implement getting this credit if you had anything outside of a plain vanilla sale.  Also, we know that enforcement of what few rules there were around getting the credit was poor (arguably abysmal). I’m specifically thinking of the prison inmates who got the credit. 

It is really unfortunate that there are so many candidates for this inauspicious designation of biggest tax blunder in 2010.  Perhaps a better way to think of 2010 is as the least-boring tax year on record.  I think it’s an ancient Chinese curse, “may you live in interesting times…”