Tax cut timing could be costly

You'd think that by now we'd all be prepared for the annual Congressional tax procrastination.

Unfortunately, though, the timetables for getting tax documents updated is not yet as flexible as we'd like. That means that as many most years wind down, we and the IRS are on edge waiting to see what changes will be made to tax laws.

When Washington finally hands down its edicts, the IRS then goes into full-court press mode to incorporate any changes. There are revisions not only the documents that we taxpayers will use in the coming filing season to complete our returns, but also changes to filing and tax-collecting processes.

Not too long ago, 2008 to be exact, the IRS considered delaying filing season while it waited for Congress to finish up its work.

That was when 2007 was winding down. That year, late legislative action on the alternative minimum tax, or AMT, eventually meant that some returns weren't processed by the IRS until February 2008. 

Other law changes for that same tax year also pushed filing back to March 2008 for taxpayers who took advantage of late-approved debt forgiveness tax laws.

And the November 2009 homebuyer tax credit tweaks meant that during this most recent filing season that e-filing was out of the question for some taxpayers.

Tax time's a-wasting: Now we await action on tax extenders and Bush tax cuts to see what will happen in 2011.

Right now, the news is not good. If legislative decisions aren't made soon as far as the expiring 2001 and 2003 tax cuts, the procrastination could cost us taxpayers real dollars.

I'm not talking about the chance that the tax cuts, or at least some of them, might be gone as of Jan. 1, 2011. Personally, I expect Congress to keep most of them in place.

The big issue is when will they decide that.

If the House and Senate don't act soon, worker paychecks could be smaller at least for the early part of next year. In fact, says the IRS, for any taxpayers to get maximum immediate benefit of the tax cuts in 2011, Congressional continuation of them must happen by November.

The start of that month is the drop-dead date for the IRS to prepare and distribute withholding tables that employers use to calculate and implement just how much is taken out of each worker's paycheck.

If the House and Senate do eventually make changes that keep part or all of Dubya's tax cuts, the process to correct and repay the overwithholding would then be put into place once the tax rates for 2011 are official.

But for a while, workers could receive smaller paychecks.

And all of us will pay via our tax dollars for the double work that the IRS must do if the final tax cuts are changed later rather than sooner this year.

So if you happen to run into your Representative or Senator, in addition to telling them how you want them to vote on the tax cuts, you might want to tell them to get on the stick!

Related posts:

• Democrats who support Bush tax cuts
• Some quick tax cut calculations
• OMG! What will happen to my tax bill if the Bush tax cuts expire!?!
• Tax cuts smackdown!
• Your 2011 tax burden revised
• Yet another tax what-if calculator

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Comments

[Penegra]

Oh..!! I just get hammered all time when it comes to tax cutting..