Taxpayers did not benefit from Congress’s procrastination on deciding whether or not to extend the 2001 Bush tax cuts. Despite having ten years to make a decision, Congress left it until two weeks before the extension would expire to address the issue. As a result, the IRS must now reprogram its processing systems for provisions that were extended in the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 that became law on December 17, 2010. Among other things, this law essentially extended the 2001 Bush tax cuts for two more years.

An entirely predictable consequence of Congress’s procrastination is that some federal taxpayers need to wait (in this case, at least until mid to late February) to file their individual tax return. This will necessarily cause those receiving a federal refund to be delayed. If you fall into at least one of the three categories, you need to wait to file your tax return and ultimately wait to receive any refund.

  1. Claim itemized deductions on Schedule A (e.g., mortgage interest, charitable contributions, medical and dental expenses, state and local taxes)
  2. Claim higher education tuition and fees (deduction for parents and children covering up to $4,000 of tuition and fees paid to a post secondary institution)
  3. Claim educator – expenses (deduction for kindergarten through grade 12 educators with out-of pocket expenses of up to $250)

Because refunds are necessarily delayed, the government benefits from Congress’s procrastination at the expense of taxpayers. Out of the 144 million that paid federal income tax in 2009, more than 97 million received a tax refund (excluding any stimulus payments). More than two-thirds (68%) of income-tax payers received a tax refund in 2009. The government refunded over $330 billion.

The IRS provides an online calculator that estimates how much of your income should be withheld to avoid making the government an interest-free loan. If you are an employee, this calculator can help you determine whether you need to give your employer a new W-4 form (Employee’s Withholding Allowance Certificate) to avoid having too much or too little Federal income tax withheld from your pay.

Fulcrum Inquiry performs forensic accounting, business valuations, and economic litigation analyses, including in complex tax matters.