Due to the government shutdown that took place in October of this year, the 2014 federal income tax season is expected to be delayed, based on reports from the Internal Revenue Service. A delayed tax season can have an impact on many people including individual taxpayers, business owners, and tax preparers and advisors, and tax software developers.
Why did the shutdown cause a delay in the next tax season?
The Internal Revenue Service works throughout the year on a variety of tasks that go way beyond accepting and processing tax returns during the standard tax season that takes place between January and April each year. There are really two major tax seasons, the first with a majority of returns due April 15th and the second with returns due October 15th for those individual taxpayers filing for a six-month extension. In addition, there are multiple due dates for corporate filers, payroll taxes, estimated tax payments, and much more. The IRS also performs audits, and handles an enormous amount of correspondence to and from taxpayers, businesses, payroll services, tax services and the list goes on and on.
During the fourth quarter of each year, the IRS has a large amount of work to do in preparation for the coming tax season primarily in the area of systems preparation including training, programming, and testing. Each year due to tax law changes, the systems must be updated and that includes 50 IRS systems. The IRS handles over 150 million tax returns on an annual basis. While the government was shutdown, approximately 90% of IRS operations were shutdown and they received 400,000 pieces of correspondence that needed to be attended to once the shutdown was over and the IRS was operating again. The October 15th tax filing deadline came about right in the middle of the shutdown.
The IRS is delaying the start of the tax season because they want to ensure their systems provide tax preparers and filers a proficient filing and refunding process.
How will the delay impact taxpayers?
The start date for the 2014 tax season is expected to be delayed for one or two weeks. This means the IRS will not accept or begin processing e-filed returns prior to the start date. The IRS will also not begin processing any paper returns received until the start date. Originally the start date was scheduled for January 21, 2014, for 2013 income tax returns. The projected start dates are now either January 28th or February 4th and the final notification for the IRS decision on the new start date will be communicated sometime in December of 2013. All things considered, it may be surprising that the IRS projects just a one or two week delay in the next tax season.
Here are some of the possible effects of the delay:
- Updated IRS tax forms availability may be delayed.
- Tax software developers relying on updated tax forms may be late in providing tax software packages.
- Individuals, tax preparers, and tax advisors will be getting a late start as they await updated tax forms and software packages.
- Tax preparers and tax advisors will be faced with a shorter tax season to handle an equal or expanding number of client returns.
- Refunds could be delayed.
- Mid-January brings another government deadline and if lawmakers don't make some decisions we could face another shutdown. As this timeframe falls right before the delayed tax season is tentatively scheduled to begin, we could face an extended delay.
What can you do to prepare?
- Make sure your records are well-organized; to assist your tax preparer by minimizing the time required for preparing your return.
- Be prepared to file on-time or to file for an extension.
- Be prepared to pay any tax you owe by the filing deadline.
- Remember the start of the tax season may be delayed, but the IRS will not extend filing and/or tax payment deadlines.
- Remember that your tax preparer or advisor is working within a shortened timeframe, but continues to service the same number of clients. As the tax filing deadline approaches, tax services systems and personnel will be under greater pressure to complete their work.
- If you expect a refund, prepare for a delay in refund disbursement.
- Consider e-filing as opposed to paper filing to get your refund as quickly as possible.
- Stay informed over the next few months including an announcement in December on the start of the tax season and for information in mid-January for the next possible Government shutdown.