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IRS Delays Filing Season

Adam Rust's picture

Posted January 9, 2013

Last night, the IRS announced that it will not accept returns until January 30th, marking the second time this year that it pushed back the start of the tax season.

Traditionally, filing gets underway on or about the 15th of January. During those two weeks, millions of people rush to get their

taxes done, most often because they want to get a refund. H&R Block estimates that 18 million people file during January in a typical year, and of that group approximately 98 percent get a refund.

Refunds face a second jeopardy if the Treasury Department decides to slow up its expenditures in light of the uncertainty over debt ceiling negotiations. As it is, it appears that the days of refunds coming back in five to eight days are well in the past. Few folks seem to believe that anyone will see tax money for at least two weeks.

On the ground, this means that many households who might have been depending upon a refund to pay February rent and shore up their finances after Christmas are now in real trouble.

"I think this is a time when legislators are acting in a way that doesn't show that they know a lot about the lives of people," said a preparer at a Liberty Tax office.

IRS procedures also leave open the chance that people that file ahead of time, with the intent of submitting a return immediately, will still wait a long time. The IRS could decide to put off lining up Feb. 2nd returns (Saturday) in its refund cue until the following Friday.

It Could Get Worse

A second problem could exacerbate the situation. If disagreements over the debt ceiling are not resolved, then it is possible that Treasury could face a series of less than optimal decisions. If the ceiling cannot increase, then Treasury will have to pick and choose among its creditors. I think few would doubt that holders of Treasury bills and notes would be paid first. After that, payments to essential services and to some entitlement programs would have priority. Unfortunately, tax refunds are going to be at the bottom of any lists. There is already a precedent among states to delay the payment of refunds.

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