Who is Impacted by Congressional Tax Law Delays?

by Kevin on January 17, 2011

Ah, tax legislation and legislators. Two of my “favorite” things. Generally speaking I try to leave politics out of my writing, but when it starts to impact my finances directly I definitely start sharing.

Toward the end of 2010 Congress was going back and forth on extending the Bush-era tax cuts. There was your typical posturing: the “we should extend” crowd and the “we shouldn’t extend” crowd. Everyone took a stance, and eventually a vote was called.

That vote passed on December 17th. There’s a big problem with passing tax legislation that late in December. There were only two weeks left in the year that IRS programmers would have time to adjust all of the Internal Revenue Services’ systems to reflect the new tax codes.

Oh, and those last two weeks of the year? The week of Christmas and the week of New Years. A great time to have government employees trying to push out an update since both of those become four day work weeks automatically due to the holidays falling on a Saturday. Not to mention the normal people that take time off at the end of the year.

In short it was “great timing” and now the IRS is working to put the new tax code into effect as quick as possible. There was no way they were going to have everything ready by January 1st, and they are still scrambling to get everything put in their systems.

Tax Filing Delays Due to Late Law Changes

So, what does all this government garbage have to do with you? If you file a specific type of return you may experience a delay in being able to correctly file your taxes. This will potentially delay you receiving a refund if you are due a refund.

Despite the delay from the Internal Revenue Service and government’s side of things there is no extension of the tax filing deadline. (That deadline is April 18, 2011 for the 2010 tax year.) As always you can request an extension, but the normal date does not change.

Will My Tax Filing Be Delayed?

How do you if your tax filing and tax refund will be delayed?

The changes are affecting filers who itemize their deductions. There’s potentially 50 million tax filers that will have to wait until everything gets sorted out. If you itemize your mortgage interest or plan to use the new Educator Expense Deduction of $250 then you fall into the group that would potentially be delayed.

That having been said the delay is only expected to last until the middle or end of February. The IRS has said that not many people file their taxes in January or early February, so perhaps the delay won’t have as big of an impact as it capable of producing.

Problem with Relying on Tax Refunds

This sort of issue highlights a major problem with building your financial life with an expectation of receiving a massive tax refund on time. The situation is out of your hands. You don’t control when Congress will pass legislation or when the IRS will get any legislative changes deployed in their systems.

This is why I always recommend you try to come in as close to zero as possible when it comes to income tax returns. You can check out the full details at The Tax Return Spectrum, but the basic idea is you want to land in the area of either owing the government just a little bit of money, or being owed just a little bit of money. Intentionally planning your budget on getting a massive refund of several thousands of dollars becomes problematic when the government isn’t prepared to give your money back to you.

I’m interested to hear from readers that might be impacted from the delay. Are you in the group of filers that itemize deductions? I definitely am, so I’m waiting to visit with our CPA this year. What about you?

{ 9 comments }

informsync January 17, 2011 at 11:57 pm

Good news. I did my taxes this year hope everything goes good. THanks for this great info.

Golfing Girl January 18, 2011 at 9:32 am

We don’t itemize (standard deduction is a lot better than itemized for us), but if we did, it wouldn’t affect us much. We always get around $1000-$1500 back each year. When we receive the full refund, we usually spend a month or so deciding where to allocate the funds. We NEVER rely on a refund to pay for anything. We consider this a “bonus” and usually end up putting 1/4 in emergency savings, 1/4 in the kids’ 529 plans, and 1/2 to make an larger mortgage payment.

Budgeting in the Fun Stuff January 19, 2011 at 1:55 pm

We don’t itemize, but we may be affected anyway due to that Educator’s Credit or the fact that we both have hobby jobs that we’ll have to fill out extra Schedule Cs for I think…we don’t really care though. I’m not sure if we are even getting a refund or not yet – we’ll be working the numbers next month. 🙂

CALIGIRL 37 January 24, 2011 at 12:33 pm

Thanks for the update! I wish I would have read this article prior to filing my Itemized deductions through Turbo Tax this year. It simply would have kept me from being so surprised when I received the message from Turbo Tax confirming the above article. I probably would have waited and just mailed in my return later, but as it is, I used their free electronic filing option, my return was filed, and then came the delay message. Oh well.. it is what it is. We get a good return each year, but I agree with the above comments. The return is a bonus…that’s how we see it. Our lives and finances don’t depend on getting a tax refund. We fall into the category of being delayed because I am a full-time student and we itemize our deductions.

Thanks for the update because at least now I know WHY it’s delayed.

lynn January 24, 2011 at 4:39 pm

I did my return on turbo tax as well and at the end it did say that there would be that “delay”. But I don’t have a mortage and my schooling did not add or subtract from my returns because it was mostly scholarships. Does everyone get this “delay” message and just hope to god that it doesn’t concern them? Or is it sent to only the people that will actually be delayed?

Rich February 1, 2011 at 2:33 pm

In these times with people out of work and the economy getting worse, not better as they say. Foreclosures rising. Government debt skyrocketing. I could have used the funds to catch up on mortgage and bills. It’s sad that the IRS knowing this since December didn’t notify taxpayers. They have to find out when they go to do there taxes. Congress sat on the bill and took vacation, this is how our government sees priority. It’s sad. I’m sure any government advocate or agency will say this doesn’t affect anything. But if you’re in a household and struggling daily to catch up on your bills, it hurts allot. Watch the news and see where our governments concerns are……Egypt, Iraq, Afghanistan and spending is going up with the national debt. The US is in deep trouble. In my opinion if they keep neglecting and not listening to the tax payers the isolated attacks at politicians is going to grow into a nationwide revolution. The government and Politian’s keep talking and not saying anything. Obama the car salesman, that gets old quick. We need government action now!
Merely the opinion of a tired and sinking middle class nobody….

Furloughed37 February 5, 2011 at 7:00 am

This tax delay has affected me and my family. I was furloughed from my government job since November 2010 no pay or benefits. I am a dicorced mom of 3 who takes care of a mentally disabled mother. I have applied for jobs and have had severak interviews, but the wait is torture. I am curently in school for my Masters degree and have to rely on any money left over from that and child support from one dead beat dad. So long story short I rely on this money to help [ay past due bills and not to mention braces for my daughters teeth ehich i owe 750.00 this law should have been voted on in November, but who cares about my struggle. A veteran of 11 years honorably discharged, bachelors degree, not a felon, but a mom doing it by the grace of God to take care of her family.

Furloughed37 February 5, 2011 at 7:05 am

Forgive the typos, I was in the dark typing.

This tax delay has affected me and my family. I was furloughed from my government job since November 2010 no pay or benefits. I am a divorced mom of 3 who takes care of a mentally disabled mother. I have applied for jobs and have had several interviews, but the wait is torture. I am curently in school for my Masters degree and have to rely on any money left over from that and child support from one dead beat dad. So long story short I rely on this money to help pay past and current bills and not to mention braces for my daughters teeth which I owe 750.00 this law should have been voted on in November 2010, but who cares about my struggle. A veteran of 11 years honorably discharged, bachelors degree, not a felon, but a mom doing it by the grace of God to take care of her family. Whats next?

Dulcie Delasbour July 4, 2011 at 6:14 pm

Good data, a number of thank you to the author. It’s puzzling to me now, generally, the usefulness as well as significance is overpowering. Vastly thanks again and best of luck!

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