Your tax refund could be delayed this year, IRS says

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NEW YORK (CNNMoney) — As much as people may hate paying taxes, they do love their refunds.

Normally, the IRS cuts its refunds checks pretty quickly. But this year, because of budget cuts, IRS Commissioner John Koskinen has warned that there could be a delay in issuing them.

People who file paper tax returns could wait an extra week for their refund — “or possibly longer,” wrote IRS Commissioner John Koskinen in a memo to employees Tuesday. And filers with errors or questions that require additional review will also face delays.

Last month, Congress approved a $10.9 billion budget for the IRS for fiscal year 2015, which ends in June. That’s the lowest level of funding since 2008, Koskinen said.

Koskinen said the budget cuts would result in several other changes at the agency, including:

Fewer audits. Due to cuts in enforcement staff, collection efforts for individuals and businesses will be reduced.

Hiring freeze. The freeze, plus normal attrition rates, will result in 3,000 to 4,000 fewer full-time employees at the agency by the end of June. Including the headcount losses incurred since 2010, that means the agency’s full-time staff will be reduced by as many as 17,000 employees over the course of five years.

Less taxpayer help. Cuts in overtime and temporary staff hours will not only delay refunds, but hurt correspondence with taxpayers as well. Koskinen said it’s likely that fewer than half the taxpayers that call the agency will be able to get through.

A possible two-day shutdown after tax season. To minimize disruptions, Koskinen said a temporary shutdown, if needed, would likely occur closer to June. But, he added, the agency will do what it can to avoid this option, which he called a “last resort.”

Delays in IT investments. Among the delays, will be technologies that offer new taxpayer protections against identity theft.

Nearly 8 out of 10 taxpayers get refunds

Every year, nearly eight out of 10 U.S. tax filers get a federal tax refund. The average amount paid over the past few years was roughly $2,800, according to the most recent IRS data.

Who gets these refunds varies by income group. While 84% of those making less than $50,000 received a refund in 2012, only 34% of those making more than $200,000 did, according to an H&R Block analysis of IRS data. But their average refund – at $12,611 – is more than six times the average $2,086 that those in the lowest income bracket received.

Of course, any financial planner will tell you that a refund is nothing more than an interest-free loan to the government, and that tax filers would be better off if they’d had the money during the year to invest or pay off debt.

But fear tends to be a bigger motivator.

“Many people want to make sure they don’t owe the IRS money,” said Katherine Pickering, executive director of H&R Block’s Tax Institute. So they err on the side of having too much withheld from their paychecks.

The other big reason so many people receive refunds: tax breaks.

For low-income filers, a big part of their refund is due to the Earned Income Tax Credit, which they can claim as long as they hold a job. The EITC is an antipoverty program designed to encourage and reward work, and it primarily benefits workers who have children.

For those higher up the income scale, the actions they take during the year can make them eligible for more tax breaks and set them up for a refund – whether they buy a house, move to a high-tax state or city, bump up their charitable contributions or make their home more energy efficient.

So, what do taxpayers do with all of that refund money? Last year, the two most common things people did were pay bills and make big-ticket purchases – such as buying a car or paying for a vacation, Pickering said. A small percentage used their refunds to help pay down a mortgage or other home loan.

Conspicuously absent from most refund recipients’ list, however: Using the money to bolster their savings, she said.

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    • Alice Smith

      No kidding! Wouldn’t it be a blast of fresh air to actually hear media proclaim the truth for a change? FWIW, I know I’m not alone in writing that the measly 1000 or so I get back is applied to my property taxes. Now, thanks to the organized criminals in our government, they get to steal even more from me because I REFUSE to sign up for their completely unconstitutional AKAcare. (for any that question that, please, go get yourself a little pocket Constitution and read through it. NO WHERE, in that document also known as our Law of the Land, does the government have authority over our healthcare. “When we give government the power to make medical decisions for us, we, in essence, accept that the state owns our bodies.” – Ron Paul

      • Rach Bee

        I’m with you, I refused to sign up as well, I refuse to allow anyone to coerce me into buying something I don’t want/need. I’m making well under 30k a year, I have kids, and I don’t accept any government assistance. Almost everyone I know has signed up for healthcare and so far ALL of them did not get what they expected and are regretting ever signing up. To mandate such a thing as healthcare just doesn’t seem legal. It also doesn’t change anything, I could not afford the health insurance before(never wanted it anyway)… and I can’t afford it now… The only difference is now the government will take money from me anyway in the form of penalties. Thanks Obama! =D

        • alice smith

          “To mandate such a thing as healthcare just doesn’t seem legal.”
          Rach, It’s not legal. I was serious about people looking at the Constitution. Healthcare is outside the authority that the Constitution binds government. That said, when the fines hit people, I’m hoping there are massive lawsuits as then people will have standing. What you wrote reminded me of a cartoon drawing that I saw a year or so back. It showed a guy on a park bench with his head on his hands and the bubble said, ‘I couldn’t afford health care before, now, they’re going to fine me for not affording health care. Bottom line, the whole thing is a scam on the American people and an excuse for stealing more of our money. At what point do we admit that we’re nothing more than slaves in the eyes of a government that was suppose to be our public servant? George Washington said: ““Government is not reason, it is not eloquence, it is force; like fire, a troublesome servant and a fearful master. Never for a moment should it be left to irresponsible action.”” It’s long past time, ‘we the people’ got a fire extinguisher.

    • Alice

      Tisha, This indictment is against 2 branches of our government system. Both the judicial and congressional branch are guilty of not upholding the Constitution with allowing AKAcare to go forward. They have violated their oath of office which IS a federal crime. People don’t need to anyone to tell them what the Constitution clear states. It was written by the Founders of this country for average man to understand. As a people, we’re guilty of complacency and apathy, or just plain laziness in not reading for themselves. The bashing on this forum is based upon the willful ignoring, by the press, of the obvious root of the problem. Former Supreme Court Justice Hugo Black once said, “Our Constitution was not written in the sands to be washed away by each wave of new judges blowing by each successive political wind.”

  • lloyd

    seams like every year the irs comes up with some excuse . in fact they shouldn’t have an interest free loan we have to pay intrest on our loan at the bank. . our I should say they give some of our money two other countries for war where does the government get off of that they should let other countries fight there oun war