Sequester won't affect return speed, cuts filing days - WSMV Channel 4

A taxing situation: Sequester affecting IRS returns

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A delayed return is a day at the beach compared to what the IRS is facing - a backlog of work caused by the new tax laws and a likely shortage of staff to handle critical tasks. (Source: MGN) A delayed return is a day at the beach compared to what the IRS is facing - a backlog of work caused by the new tax laws and a likely shortage of staff to handle critical tasks. (Source: MGN)

(RNN) – As people fill out tax forms this year, they may ponder whether the sequester will delay their anticipated refunds.

The short answer is no, but that is by no means a reason to rejoice if you're looking at the bigger picture.

It's also important to understand that the $85 billion budget cuts this year are not the only culprits in this tricky situation.

The sequester on its own will not affect returns. Internal Revenue Service staff furloughs that are almost certainly necessary would not take effect until well after the April 15 filing deadline, according to a memo obtained by the Huffington Post.

However, the last-minute passing of the American Taxpayer Relief Act pushed back the start of tax season to Jan. 30.

Those eight days of potential filing time may not seem like a lot, but considering a normal tax season is about 80 days long, that equates to 10 percent of filing time lost.

The IRS had to update its system to reflect the new laws and was still updating files for some classes of people when tax season opened. That delayed the mailing of necessary forms for some people, including small business owners, who have a March 15 filing deadline.

Reuters reported the chief tax officer of Jackson Hewitt Tax Service could not file as of March 5 because a form he needed to report income from rental property had not arrived.

A software change that affected people who are claiming student tax credits is another factor taxpayers will have to deal with. Several people have already complained about delayed returns, and it has affected an estimated 600,000 H&R Block customers.

Furloughs in the summer could mean people who file for extensions will bear the brunt of this dilemma. Correspondence with the IRS could slow to a crawl if fewer employees are available.

Reduced staff at the IRS also means the agency will have less time and people to perform audits and collections.

That's good for people who don't want to pay, but terrible for an already reeling economy.

The back and forth in the capital the past several months has reminded people of one important thing: The government desperately needs it money, too.

"Right now you may be saying, ‘boo hoo.' But fewer audits could result in billions of dollars in lost revenue and further complicate deficit-reduction efforts," tax expert and attorney Stephen Fishman wrote in a column for Inman.com. "In recent years each dollar spent on the IRS has returned at least $4 in additional enforcement revenue."

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