IRS will start processing tax returns late this year
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Congressional procrastination has caused problems for the diligent -- and those looking forward to a refund -- who want to dispatch their 2012 federal income tax returns as soon as possible.
The IRS said it will begin processing individual tax returns Jan. 30, eight days later than it had anticipated.
That delay was caused by Congress and President Barack Obama dragging their feet in coming to terms on what to do about the long list of tax cuts that expired at the end of 2012.
The delay will cause even bigger problems for a smaller set of taxpayers, including those who claim depreciation and amortization for rental or business property, home energy credits, adoption expenses and a host of other items.
The IRS must update forms for claiming those and other, less common credits, then test its computer system to make sure it can process the forms correctly. As a result, the agency said it will be late February or early March before it will start processing tax returns that include those forms.
Downtown accountant Paul Rudoy said the eight-day delay could cause some problems for taxpayers eager to complete their returns so they can fill out the Free Application for Federal Student Aid, or FAFSA. Colleges use the standard form to make decisions on need-based financial aid.
Mr. Rudoy said uncertainty about what Congress would do about the alternative minimum tax, or AMT, was the biggest reason the IRS had to push back the start of tax season.
Congress enacted the alternative minimum tax in 1969 in an effort to make sure the affluent, who can reduce their tax bills by taking advantage of large deductions and exemptions, pay a minimum amount of taxes. The AMT limits the amount of deductions and exemptions that can be claimed based on the taxpayer's income.
However, because the AMT was not indexed for inflation, Congress has had to make adjustments so that middle-class taxpayers are not subjected to a tax intended to target the more affluent.
The tax law that Congress and the president agreed to a few weeks ago provided a permanent fix for the AMT, making inflation adjustments automatic without lawmaker action.
That and other provisions should mean the tax season will get off to a normal start next year.
"We don't have as many unknowns for the end of 2013 as we did for the end of 2012," Mr. Rudoy said.
First Published January 22, 2013 12:33 am