Is it true that tax refunds might be delayed in 2008?

Question

I didn't know if that was just a rumor, or if it was true. And if they are going to be delayed, why? And for how long?

ATM issues?

Oops... AMT.

Answer 1

Until they settle the AMT issues

Answer 2

Congress didn't get their act together until very recently to provide yet another one-year fix to the AMT (Alternative Minimum Tax) issue. This was a tax established in 1969 to prevent wealthy people from avoiding taxes altogether through various deductions and tax loopholes - but an income level that was considered "wealthy" in 1969 is upper middle class at best now. Yet again, they just put in a higher limit for this year rather than actually fixing the problem.

In any case, it will take 6-8 weeks or so for the IRS to reprogram their computers and test everything for the new rules, so some refunds could be delayed. They haven't announced yet exactly how the whole mess will be handled.

If your income is below around $75K (or $100K on a joint return) you are not likely to be affected by the AMT or by the delay.

Answer 3

The IRS told the government back in October that it can take 10 weeks to reprogram the computer if they changed the AMT amounts/rules.

The government changed these on December 21st. 10 weeks from then pushes filing into February and March.

By the way, the IRS is saying all tax returns will be delayed. This apparently will include the 1040EZ (where it's mathematically impossible to owe AMT) as well as the 1040A and 1040. There's no real magic amount of income below which you can't owe AMT. Someone filing a 1040A as MFS with a bunch of dependents can trigger AMT with $40K of income...

Plus the IRS doesn't want a bunch of early returns done as 1040EZ and then later amended into the equivalent of a 1040 by people who can't wait for their refund.

Answer 4

So far we've seen nothing official. At my firm, our outside software company told us the IRS had said that efiling would not be open until mid February (as opposed to mid-January) which obviously affects a lot of returns. Wait and see, that is all we can do.

The AMT patch was passed awfully late. Hate to say this, but I'd rather efiling stay closed and operate properly when fixed then have huge tech glitches because people can't be patient.

ETA! - IRS Newswire, Issue Number IR-2007-209

Filing Season Opens on Time Except for Certain Taxpayers Potentially Affected by AMT Patch

WASHINGTON — The Internal Revenue Service announced today that the upcoming tax season is expected to start on time for everyone except certain taxpayers potentially affected by late enactment of the Alternative Minimum Tax “patch.”

Following extensive work in recent weeks, the IRS expects to be able to begin processing returns for the vast majority of taxpayers in mid-January. However, as many as 13.5 million taxpayers using five forms related to the Alternative Minimum Tax (AMT) legislation will have to wait to file tax returns until the IRS completes the reprogramming of its systems for the new law.

The IRS has targeted Feb. 11, as the potential starting date for taxpayers to begin submitting the five AMT-related returns affected by the legislation. The February date allows the IRS enough time to update and test its systems to accommodate the AMT changes without major disruptions to other operations related to the tax season. As the IRS has said previously, it will take approximately seven weeks after the AMT patch was approved to update IRS processing systems completely.

Although as many as 13.5 million taxpayers will not be able to file their returns until Feb. 11, the effect of the delay may be lessened by the fact that under previous filing patterns only between 3 million to 4 million taxpayers file returns with the five affected forms during these early weeks in the filing season.

***

Sorry for the dump of information. There was actualy more to this notice!!!!

Answer 5

I hope this will help you.

The IRS is considering not processing all early returns if Congress doesn't resolved the alternative minimum tax (AMT) issue soon. That would mean that early filers, all those folks who want to get their 1040s in ASAP because they are due refunds, would end up waiting a few extra weeks for their tax cash.

Answer 6

Sort of. What is happening is that due to the passage of a number of bills that will take effect the IRS has to reprogram all their computers, yada. This means they will not be able to PROCESS RETURNS until after the first of February; so, in effect, yes, refunds will be delayed this year. Last year, for instance, 15 million returns were processed by Feb 1st, paying out about 37 billion dollars in refunds. This year it ain't going to happen.

Answer 7

Yes they have to change the programming because of the AMT