April 20th, 2012 by Stephanie Erickson
With an IRS programming error early this tax season, many taxpayers’ refunds were delayed. In a report released by the Government Accountability Office, the IRS was said to have delayed 6 million returns from January 17 to January 26 due to an error in their programming. Just this year, the IRS began processing tax information daily (instead of weekly). They tried to take advantage of this change by automating some compliance checks before refunds would normally be processed. In this process, the IRS expected approximately 12% of tax returns would be affected. However, during just the first week of filing, 80% of tax forms were being held for additional review.
Although this caused an estimated 5.5 million refunds to be delayed, while the IRS identified and solved the problem, IRS Commissioner Shulman claimed they remained on schedule overall. He stated that even with initial issues, the overall average refund timeline remained steady compared to fiscal year 2011. “The delays were isolated to early issues in the filing season, and after that the IRS was processing tax returns according to normal refund timelines,” he said, adding that “Even with the delays, the IRS was generally delivering refunds in our normal 10-21 day time frame.”
Other groups, and specifically the National Taxpayer Advocate, attribute the tax refund delays to the major IRS budget cut this year. These individuals claim that the most serious problem facing taxpayers is that the IRS is not properly funded to effectively serve them. The budget cuts have caused long wait times at the Taxpayer Assistance Centers as well as the layoff of thousands of employees, which ultimately could have caused delays in this tax season as well.
Additionally, Shulman warned that next year’s tax season could be delayed if Congress does not resolve questions regarding the Alternative Minimum Tax Patch. This is an income tax, imposed by the federal government, on individuals’ and corporations’ adjusted amount of taxable income, at a nearly flat rate, above a certain threshold. In 2010, it was decided that a large amount of taxpayers wouldn’t have to pay the AMT in hopes that wealthier taxpayers who are able to lower their tax obligations through different deductions still pay at least a minimum amount of tax. The yearly patch is necessary to adjust the AMT based on increases in costs of living. The Ways and Means Committee said they will again examine tax extenders, like the AMT patch, after the April recess. Shulman is encouraging the committee to resolve questions over the patch sooner than later to avoid delaying next season.
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