As is my usual routine, I like to wake up and read various news sites on the Internet to see what is going on in the world. As soon as I opened CNN.com I was shocked to see the following headline: 50 million taxpayers must delay filing – IRS. Surprisingly I am almost ready to file my taxes, and of course I clicked on the link. As a college student I rely on my tax refund to offset the costs associated with school. Students can deduct up to $4000 of their tuition costs which for me is a huge benefit.
As I read the article I reviewed each item to see what exactly had changed. Apparently the IRS is saying that due to Congress acting late on the tax bill in 2010, they have not had time to update their systems to take into account the new regulations. According to the IRS, those who file Schedule A (Itemized Deductions), Form 8917 (Higher Education Tuition and Fees Deduction), teachers claiming the Educator Expense Deduction, and also the District of Columbia First Time Homebuyers Program have all been affected by this delay in filing.
So let me get this straight, a new tax law that was enacted by Congress in late December 2010 has now affected people who are going to file taxes for 2010? Apparently so. The IRS says this affects only a few people, but I can tell you that the few it will affect are probably going to be the worst hit. Individuals who significantly early are more often than not getting a refund (I mean why wait to get money owed to you). Those individuals usually have easy taxes to do as well, and most likely either do their own or have an accountant who spends minimal time doing them. I would bet that because of these two factors, these individuals are ones counting on receiving that refund quickly to offset expenses and pay bills immediately. I know I am.
Many students pay for tuition themselves or through personal loans. Many students pay those loans each semester and count on receiving their refunds to offset the cost of those loans and to help pay for materials such as textbooks. With the delay by the IRS these students will now struggle.
So why is this a big deal? Well, I think it is an outright lie to the American public by the IRS. Let’s add up the facts.
1. If Congress had not acted on the tax bill, the current tax law would have expired on December 31, 2010. Requiring changes for 2011, not in 2010.
2. Congress acted on a law that “extended” the Bush tax cuts (some of which include the ones listed above). So if we are extending current laws, what changed exactly? While I am not an accountant, in trying to research this post, I did try to find the exact changes. However, it is funny how the specific changes must be hidden deep in some IRS handbook because I could not find a simple easy explanation of the changes, only what generally was changed that would cause the holdup.
3. How come I can go to my accountant today and get my taxes completed with all the proper forms and everything, but can’t file them yet? How did the accountants in the world get all the up-to-date tax forms already and they are ready to go?
4. How come I can go online and TurboTax says that they I can go ahead and fill out my taxes, but they will have to save them until the IRS is ready?
If these are such major changes and they are impacting everyone in America, how come the individuals and businesses that handle filing these taxes are already ready and the IRS isn’t? I don’t believe this is an Obama issue in the least, although it could be. This is simply a result of an antiquated tax system and computer system that is not capable of taking changes on the fly. What it tells me is that the IRS had planned for the Bush tax law to expire and had deleted that from their filing system. They now have to go back and add it in. But I am still puzzled at how a tax law that would have either expired on December 31, 2010 or was extended could affect me filing my taxes for 2010.