By ALLISSA KLINE
akline@bizjournals.com | 716-541-1612

It's been a wild ride for CPAs in the final weeks of 2010 as they await tax code guidelines from the federal government.

There is some clarity in tax rules in the days since President Barack Obama announced a deal with Congressional Republicans to extend Bush-era tax cuts. But CPAs won't know for certain how to advise clients on several tax-related matters until Congress votes on the president's plan.

"It's difficult," said Teresa Majors, partner in Dopkins & Co., Amherst. "We're doing a lot of year-end planning for clients, and we have been showing them what their taxes will look like with changes and without changes (to tax codes). We ... say it's pending and something may happen before the end of the year, but we don't know."

A series of unresolved tax-related issues made year-end planning tough for CPAs and their clients.

Some key issues:

• Bush-era tax cuts, due to expire Dec. 31, are likely to be extended for two years as part of Obama's plan. If extended, it means that individual tax rates will continue to be 10 percent to 35 percent, depending on income level. Additionally, qualified capital gains and dividends would continue to be taxed at 15 percent maximum, not 20 percent maximum for capital gains or 39.6 percent maximum for dividends. Richard Wojciechowski, partner in Gaines Kriner Elliott LLP, said individuals may want to convert regular IRA accounts into Roth IRA accounts.

• As part of Obama's plan, an alternative minimum tax (AMT) patch would be put in place. Without it, experts say 21 million Americans may be subject to increased taxes.

"That would have cost dollars out of people's pockets if that didn't get fixed," Majors said.

• There has been no estate tax for the year 2010 as it expired in 2009 and wasn't extended. Obama proposed a maximum estate tax rate of 35 percent and a $5 million exclusion through Dec. 31, 2012. That means an estate valued at less than $5 million would not be subject to estate tax.

"We've been warning clients that if this was reverted (to previous years' levels), more clients would have to pay," said Mark Tronconi, tax partner in Tronconi Segarra & Associates LLP.

Obama announced Dec. 6 that he reached an agreement with the GOP to extend the Bush-era tax cuts in exchange for continued unemployment benefits, payroll tax cuts and business tax cuts. Congress is in session until Dec. 17. If members don't vote on Obama's plan before they leave for break, tax codes will remain in a state of flux into the New Year.

Richard Wright, tax director at Freed Maxick & Battaglia CPAs PC in Buffalo, works with small businesses in Western New York and the individuals who own those businesses. He said he is working with one client who wants to sell a business over a five-year period. The client wants to know the tax liability involved, but Wright has been unable to give him a hard answer.

"It's making it hard for individuals and businesses to finalize their 2010 tax situations," Wright said. "I have to tell clients, ‘Here is the law as of today, here's what we think it might be and here's what it could revert to.' Sometimes we're running multiple scenarios."

Wright, Majors and Tronconi all said that clients have been frustrated with the situation. Those trying to organize year-end tax plans may wind up scurrying in the final days of the month.

"We get calls all the time from business clients who want to know what to do by the end of the year and what to do at the beginning of the year," Majors said. "There are real costs involved. It comes down to the last few weeks in December when people want to spend time with family and they have to do tax planning then" because rules aren't finalized earlier.

Some Democrats, unhappy with Obama's plan, may vote against it. CPAs, meanwhile, are taking a wait-and-see approach.

"This is the exciting part of tax laws," Wright said. "No two years are really alike. It sometimes seems like there are so many decisions going one way and then another decision comes along that seems contrary."