Taxed by confusion: with tax cuts set to expire by year's end, time to plan for 2011.

• Author: Lewis, David
• Position: 2010 TAX GUIDE

CPAs and financial advisers have these three words of wisdom for taxpayers this year Duck and cover.

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Seldom if ever has U.S. tax policy, present and future, seemed more confusing and burdensome to the average taxpayer - and the exceptional taxpayer, as well.

"It is complicated this year, more than ever, to say the least," says Doris Martinez, president of Lakewood-based Taxpayer Defense, a firm that specializes in aiding taxpayers through audits and the like. 'Things are hard; things are terribly difficult right now."

This is an especially poignant moment for taxpayers for two main reasons: First, no one can predict what Congress and President Obama will do regarding taxes, even for health care, the most imminent tax package, although everybody agrees taxes are going up; second, the "Bush tax cuts" are due to expire at the end of the year, and no one knows what's going to happen with them either, other than to say that their end means taxes are going up.

"No one knows what is going to happen next year, so the only thing that seems almost certain from my perspective is that Congress and the president are going to let the Bush tax cuts expire," says Wayne Farlow, founder of Westminster-based Financial Abundance LLC and a ColoradoBiz columnist. "The implications of that are that my wealthier clients, my clients in higher tax brackets, their tax brackets automatically are going to go up, and long-term capital gains taxes and dividends taxes are going to go up."

"We have had numerous tax changes with the various stimulus acts and other things, so what we mainly look for is not anything in particular but the overall increase in taxes. Something is going to happen, but we don't know what. There are so many things in flux," says Chuck Bryson, managing member of Greenwood Village-based Bryson Engelstad & Co. P.C.

Martinez has been in private practice since 1986, and prior to that was an IRS field agent for seven years. She points out that not only is tax policy uncertain and tax law barely comprehensible, but the administration of the IRS itself has entered a period of extreme storm and stress.

"We are finding that even the simplest cases, things that used to be simple, have become extremely difficult," Martinez says. "For example, it used to be much simpler to get payment plans for relatively low dollar amounts. Now they are taking sometimes over a year to get resolved, just to settle on a payment...