Don’t Wait For Congress To Act, File When Ready

Don’t Wait For Congress To Act, File When Ready

[ad_1]

The IRS kicked off tax season on Jan. 29, 2024, but taxpayers and tax professionals remain anxious about the elephant in the room: a massive tax package with retroactive changes, including an expanded child tax credit (CTC).

The Tax Relief for American Families and Workers Act was announced in mid-January by Senate Finance Committee Chair Ron Wyden (D-Ore.) and House Ways and Means Committee Chair Jason Smith (R-Mo.). Days later, the House Ways and Means Committee acted quickly and in a bipartisan manner, voting 40-3 to advance the deal. House leaders said the vote might come to the floor this week, potentially using a fast-track process.

Details

The proposal would, among other things, phase in a refundable portion of the child tax credit and increase the maximum refundable amount per child to $1,800 for the tax year 2023—yes, that’s last year— as well as $1,900 in the tax year 2024, and $2,000 in the tax year 2025. The refundable credit would allow lower-income families to qualify for it even if they did not owe any tax. It would allow for the same flexibility taxpayers had during Covid to use the current tax year or prior tax year earned income to calculate the credit.

The bill includes other potentially retroactive changes, including business-focused breaks, but the child tax credit changes have attracted the most concern. That’s likely because the refundable nature of the credit results in money in the pockets of low to middle-income taxpayers. Those taxpayers seeking a refund tend to file early.

When To File

So, should taxpayers file now? Or wait and see?

It depends on who you ask. IRS Commissioner Danny Werfel told reporters just before the filing season opens, “We urge and encourage taxpayers to file when they’re ready,” adding, “Don’t wait on Congress.”

But not all tax professionals agree. Some worry that filing now—only to find that Congress has made changes—could mean that a rush to file early will result in having to amend tax returns later. That could cost taxpayers more time and money.

Werfel sought to reassure taxpayers, telling reporters last Friday, “If there’s a change that impacts your return, we will make the change, and we will send you the update — whether it’s an additional refund or otherwise — without you having to take additional steps.”

Werfel also said that the IRS has experience with tax changes close to the filing season (or after it begins), claiming the agency has “deep experience in assessing and reviewing” the changes.

Still, skepticism abounds, with worries about how quickly those changes will be resolved—especially during the tax season when IRS resources may already be stretched.

Ways And Means

On Friday, the House Ways and Means Committee released a statement noting that the text of the legislation includes a requirement that the IRS process any adjustments that might be needed to already-filed tax returns “as expeditiously as possible” so that amended returns won’t be required. The statement went on to say that the IRS “confirmed its intention to make necessary systems updates by around six weeks after the date of enactment.” By way of comparison, typically, the IRS issues more than nine out of 10 refunds in less than 21 days. The reason for the pushes involves “protecting Americans from having their tax refunds subject to political gamesmanship.” Specifically, according to the Committee, the bill “makes it illegal for the Biden Administration to delay tax refunds for political purposes,” vowing that “Congress will hold the IRS accountable to fulfill both the letter and intent of the law.”

According to the Committee, making those changes should not be difficult and will be handled within the scope of IRS’s normal operations. They suggest most Americans won’t even notice the changes since “nearly 90 percent of American taxpayers are guaranteed to have no adjustment to their tax liability due to the child tax credit changes – they will file their taxes and receive refunds as normal.”

The IRS expects more than 128.7 million individual tax returns to be filed by the Apr. 15, 2024, tax deadline.

Forbes will continue to update coverage as changes occur.

[ad_2]

Source link

Leave a Comment

Your email address will not be published. Required fields are marked *

Scroll to Top