HED: Will You Get Your Tax Refund on Time?
PROMO: The fiscal-cliff fix should have solved the problem, but the IRS still isn't sure.
by Dan Caplinger
The fiscal cliff may be a thing of the past, now that the president has signed into law the compromise bill that the Senate and House passed on New Year's Day. But for as many as two-thirds of all taxpayers, the verdict is still out on whether they'll get their tax refund checks on time.
In late December, the IRS said that as many as 100 million taxpayers could face delays in getting their tax refunds if the fiscal cliff weren't resolved before the end of 2012. Without certain tax-law changes that the IRS was counting on passing, IRS computers would need to be updated, which could have forced taxpayers to wait until late March before they could even file their returns, let alone expect refunds.
The complications came from the alternative minimum tax provisions of the tax laws. In past years, lawmakers had always passed a "patch" to the AMT that made inflation adjustments to prevent the tax from applying to a huge number of taxpayers, and so the IRS assumed that a similar provision would eventually apply to 2012. But with the 2012 AMT patch in limbo before the fiscal cliff deal, tens of millions of taxpayers could have been subject to the tax for the first time.
A Partial Solution
The newly passed law addresses the AMT in a more lasting fashion, making inflation adjustments for 2012 and making future adjustments automatic without requiring further action from lawmakers. That will save an estimated 30 million taxpayers from having to pay an average of about $4,000 extra in taxes.
But even with the fix, the IRS is still reluctant to say whether it will be able to avert a tax refund crisis. Although the IRS has issued new withholding guidance that reflects the provisions of the new law, it says that it's "reviewing the details of this week's tax legislation and assessing what impact it will have on this year's filing season."
Because the inflation adjustment in the new law matches what the IRS expected, there's reason to be optimistic that the IRS will be able to process returns as expected. Still, until the IRS says when taxpayers can start filing returns, refunds could remain on hold.
For more on taxes and your money:
- Fiscal Cliff Averted: Details of the Deal
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- 13 Common Money Mistakes to Avoid in 2013