CHARLESTON, W.Va. - With Jan. 1 just days away and no action yet from Congress to avoid a series of automatic tax hikes and spending cuts, state tax officials are expecting significant delays in the coming tax filing season.
Despite weeks of posturing, President Barack Obama and congressional leaders are still at loggerheads over a plan to avert nearly $600 billion in automatic tax increases and spending cuts scheduled to go into effect Jan. 1.
This so-called fiscal cliff was a part of a 2011 deal to raise the nation's debt ceiling. The tax increases come from the scheduled expiration of the 2 percent payroll tax cut and other tax cuts passed under former President George W. Bush.
Other deductions, including the out-of-pocket classroom expense deduction for educators, tuition deductions for college students, and deductions for state and local sales taxes, are also set to expire Dec. 31.
While the federal tax rates don't affect state tax collections, federal deductions could have an effect on how much income the state taxes.
State Tax Department spokesman Danny Forinash said the fiscal cliff - or any deal to avoid it - would have an indirect, trickle-down effect on state tax returns.
"We don't expect it to have an administrative effect," Forinash said. "In other words, it shouldn't affect how West Virginia collects taxes. It could affect adjusted incomes, thereby affecting amounts owed at the state level."
He said tax officials are watching whether Congress works out a deal to avert a significant drop in the alternative minimum tax, or AMT.
The AMT was originally designed to ensure wealthy families paid a fair share of taxes, but since the level at which the tax kicks in has not been properly adjusted for inflation, it affects more and more taxpayers each year.