WASHINGTON Jan 9 Tax filing season hasn't even
started yet, and we have already fallen behind. The Internal
Revenue Service made good on its threat to delay some tax forms
if Congress went over the so-called fiscal cliff.
The tax agency said that because of last-minute and
retroactive tax law changes, it would not be able to process any
returns filed before Jan. 30. Furthermore, a slew of
late-changing forms would delay many more returns (perhaps as
many as 20 million of them) until the end of February or the
beginning of March. That's going to hurt those early filers.
Some 18 million returns typically get filed during the month
of January, and 98 percent of those get refunds, according to
H&R Block. Roughly 60 percent of those early filers really need
the money, and use it to pay off holiday bills or meet January
expenses, according to Intuit Inc.'s TurboTax.
Furthermore, there's plenty of speculation that the IRS may
drag its feet on those refunds if Congress delays approving an
increase in the federal debt borrowing limit. An independent
think tank, the Bipartisan Policy Center, said in a report
released Tuesday that if the federal government keeps up with
other key spending, including food stamps, federal salaries,
Social Security benefits and Pell Grants for education, it may
not have the cash to pay an expected $85.5 billion in tax
refunds to individual filers throughout the tax season.
For its part, the IRS is managing expectations on refunds.
It has said that last year it paid out 90 percent of refunds in
fewer than 21 days and it expects to do that this year too. But
it has reserved the right to take longer on some refunds to do
fraud checks and for other reasons. "Don't count on getting your
refund by a certain date to make major purchases or pay other
financial obligations," it says in guidance aimed at tax
In its new "Where's My Refund" website ()
the IRS won't offer guesstimates on when refunds may be
expected. It will simply tell tax filers if their return has
been received, if it has been approved and if the refund has
And there could be logjams along the way. "It's going to be
a challenge for the IRS to accommodate the returns coming in
January 30," says Bob Meighan, vice president of TurboTax. "We
are going to be stockpiling returns and having them ready to
The biggest logjams might not be at the IRS, which has
demonstrated its capacity to process millions of returns, but in
the offices of some tax preparers - as the more complex forms
coming later in the season could squeeze a lot of those returns
into a six-week period.
Nervous yet? Here's how to negotiate tax season 2012.
- If you were Sandy-afflicted, don't wait, suggests Kathy
Pickering, executive director of The Tax Institute, a research
group within H&R Block. People who suffered casualty losses
because of the big storm, and who are in federally-declared
disaster areas can go back and file an amended 2011 return and
take your losses for that year. You can do that today, and it
might make sense to get ahead of the January 30 crush at the
- Check to see if you're in the late list. The IRS has
published a list of 30 forms that will be delayed ().
Most of them are arcane and will only affect less than 1
percent of tax filers, says Meighan. But a couple could hold up
millions of forms. Most notable is the form that businesses use
to claim depreciation. That form is used by many sole
proprietors and other small business owners. Another popular but
delayed form is required for folks who claim residential energy
credits. The form for qualified adoption expenses is also on the
If you need a form on the list, accept that you won't be
able to file until late in the season, though you can probably
get most of your paperwork done early. If you're concerned about
your tax preparer not having enough time to squeeze you in
between March 1 and April 15, consider filing for an extension
of your time to file. You will still have to come close to
paying your taxes due by April 15.
- Budget for winter. If you are a typical early filer with a
simple return and a need for a quick refund, you can still get
your return ready early, through Block or TurboTax or another
preparer. Both of those megafirms are ready to deluge the IRS on
January 30, and that means your refund should be in your bank
account before the end of February.
But cast about for another source of cash to tide you over
until then. Refund anticipation loans which allowed filers to
borrow against their expected refunds, often at effective annual
interest rates topping 100 percent, have pretty much disappeared
from the landscape, with major lenders and tax preparers walking
away from that business amidst heavy government pressure.
Live lean, delay paying off the credit cards for an extra
month if you have to, and make sure you give the IRS a bank
account number so it can direct deposit your refund as soon as