Congress recessed until November with more than 50 important tax breaks waiting for renewal. Unless lawmakers take action right after in November, millions of tax refunds will be delayed next year.
The definition of insanity is doing the same thing over and over but expecting different results. Which means one thing: I am positively certifiable.
The reason? I trusted Congress. Again.
So naturally I'm disappointed (again) but not nearly as disappointed as U.S. citizens will be when tax-filing season arrives. Once again, thanks to the solons of Capitol Hill, the Internal Revenue Service is likely to delay accepting returns, waste money scrambling to update computers, tax forms and regulations, and will be late when it finally sends out about $275 billion in refunds to 102 million waiting taxpayers.
Congress pulled the same stunt last year, as it has three times since 2006. So if this gives you a feeling of déjà vu, well, you can say that again.
Not my Daiquiri deduction!
Every year, Congress needs to approve an extension of about 50 expiring tax credits. These range from amazingly narrow deductions for specific businesses — the ability to depreciate a two-year-old race horse over three years, for example — to basics, such as the $4,000 deduction for college tuition. There's also a $240 million rebate for excise taxes on Puerto Rican rum, which directly benefits America's vital blender cocktails industry.
Even if you don't drink Mojitos, there can be big consequences. Maybe those energy-efficient home improvements you want to make next month can be deducted, maybe not. Retirees who hope to sidestep the required distribution from their Individual Retirement Accounts by rolling it over to a charity are left in tax limbo, too. (Hint: It's much easier to do the tax limbo if you quaff a few Mojitos first.)
Beyond individual credits, there's a raft of business write-offs also left hanging, including research and development credits that has big and small businesses putting off investment, purchasing and hiring decisions, notes Kay Bell, a tax expert who runs the Don't Mess with Taxes blog.
"It's disconcerting to not know, for example, if you'll be able to deduct your state and local sales taxes," Bell says. "If not, you'll owe the IRS a bit more. But maybe you won't. Or will."
Your refund? It don't come EZ
Even if you file a Form 1040-EZ and just take the standard deduction, the delay in approving the so-called "tax extenders" could still hit you. The IRS took a huge cut to its budget and staffing after last year's disastrous federal spending sequester, losing the equivalent of more than 8,300 full-time workers. The added burden of another year of tax-rule changes at the last minute — or even after the last minute — has some tax experts predicting that 2015 will be the worst tax season ever.
If this all feels familiar, it should. Bell notes that late approval of tax extensions delayed the filing seasons in 2007, 2008 and last year, when the IRS postponed accepting returns by nine days for most filers, but left folks who claimed mortgage interest deductions, residential energy credits, depreciation of property or general business credits waiting until March to file their paperwork.
It was a mess, but I expected that our federal lawmakers would learn their lesson and get it right this year. Now that they're doing the same thing again, I have to wonder: Am I crazy, or is Congress incompetent?
Brian O'Connor is author of the award-winning book, "The $1,000 Challenge: How One Family Slashed
Its Budget Without Moving Under a Bridge or Living on Government Cheese."