Uncertainty over estate tax could affect tax preparation in coming years

The arrival of the new year saw a variety of different laws taking effect from state to state, touching on issues like smoking and texting while driving.

However, one of the most significant developments on the national level brought by January 1 was the expiration of the federal estate tax - a development that could affect tax filing results for many people in the next couple of years.

Before its expiration on January 1, the tax claimed a 45 percent levy on estates valued at more than $3.5 million. Congress is likely to act on restoring some semblance of the tax in the coming weeks, but lawmakers are generally divided about how to proceed, especially in light of the current federal deficit.

Even if Congress takes no action this year, the estate tax will return on its own in an even stronger form as of January 1, 2011 with a 55 percent levy on estates valued at $1 million or more.

The situation has led to some dark humor among accountants and tax return professionals about how 2010 could be a far more profitable year than 2011 in which to pass away.

According to an article in U.S. News and World Report, the estate tax currently applies to only about 2 percent of U.S. taxpayers, with about 17,200 having been affected in 2008. Given the substantial amounts of money that can be at stake however, this is one issue that higher-income taxpayers would serve their families well to pay attention to.

Liberty Tax Service provides computerized income tax preparation and electronic filing. Each tax office offers customers audit assistance, a money back guarantee, and free tax return checking.