Without direction from Congress on the $78 billion tax proposal, small business owners and low-income families with children could bear the brunt of the impact, complicating the filing process for millions of taxpayers. There is.
The American Families and Workers Tax Relief Act of 2024 includes three business credits that could impact 33 million small businesses and a child tax credit that is claimed by approximately 46 million Americans annually. Contains an expansion of Most of the bill's provisions would apply retroactively to 2023 federal returns, as well as 2024 and 2025.
But even though the filing season is now well underway, the bill remains stalled. The bill passed the U.S. House of Representatives by an overwhelming bipartisan margin of 357 to 70, but its final passage remains uncertain, as consideration has been delayed in the Senate in recent days.
“I will do my best together with the leader. [Chuck] Mr. Schumer and my colleagues are both pushing for this to be completed as soon as possible,” Sen. Ron Wyden (D-Ore.), one of the deal's biggest sponsors in the Senate, said recently. Ta. But his efforts stall on final consideration. At this point, the deal is likely to be postponed to late February at the earliest.
Not all households will be affected if they are already eligible to claim the full amount of the child tax credit, and many businesses will not be affected as well. But many taxpayers are now navigating last-minute negotiations in Congress, IRS filing deadlines, and the narrow margins of receiving a timely refund.
“Congress is so irresponsible.” [delay voting],” Kathryn Keene, registered agent and National Institute of Tax Practice Fellow, told Yahoo Finance.[Changing laws] Tax season can be very stressful because today's return may not be accurate tomorrow. The decisions we make today may not be the best tomorrow because Congress has retroactively changed them. ”
read more: Full coverage: 2024 taxes — everything you need to file your taxes on time
Refunds may be delayed
If the bill passes, taxpayers who claim the child tax credit could receive larger tax refunds. However, many people must decide whether to file an uncertain return or wait for further guidance before receiving a refund.
The IRS is prohibited from processing refunds for the child tax credit portion before February 15, giving Congress several more days to decide on the matter. However, it seems highly unlikely that Congress will meet this deadline. The refundable portion, known as the Supplemental Child Tax Credit, allows low- and moderate-income working parents to receive a refund of up to $1,600 per child.
“If (lawmakers) wait until after that date, it's just going to be a nightmare,” Keene said. “These are people who need this money, so do we really want to make them wait any longer than necessary?”
“These are families living paycheck to paycheck.”
The proposed bill would not increase the amount of the child tax credit, but it would temporarily increase the limit on the refundable portion until 2025. For example, a parent with two children earning $15,000 would receive a refund of $3,600 instead of $1,857.
read more: Child Tax Credit: Everything you need to know about the 2023 tax year
As the bill stalls, the IRS tells taxpayers to file their returns as soon as they are ready, without waiting for Congress. IRS Commissioner Danny Wuerffel said the IRS will help amend returns filed to comply with the new law.
“If there are any changes that impact your return, whether it be an additional refund or something else, we will make the change and send you an update without any action on your part,” Werfel said last month. “I will.”
Larry Pong, a San Francisco-based certified public accountant, is skeptical of the IRS' proposal. While the agency is adding resources to improve the taxpayer experience, the technology may not be advanced enough to identify which tax returns require additional refund credits.
“It may take six months for the IRS to figure out the situation or reprogram computers and other programs,” Pong said. “The IRS won't move a penny.”
However, other tax experts believe the IRS is unlikely to over-promise or under-deliver, given the intense scrutiny it faces nationally.
“if [the IRS] “The IRS says it can, and it probably can,” said Robert Weinberger, a fellow at the Urban-Brookings Tax Policy Center. “There are a lot of people who would love to get into trouble with the IRS.” Anyone running the IRS would be wise to be wary of promising more than they can deliver. ”
Why is Congress slow to make decisions?
This is not the first time Congress has considered changes to the tax law during tax season. Three years ago, the American Rescue Plan Act exempted up to $10,200 in unemployment compensation from federal taxes. Details of the bill changed between the House and Senate, and then again once it was finalized.
“What's so frustrating about this is that we've spent all this time considering proposed bills, and what ended up being passed was usually very different. Because there is a possibility of proposing something,” Keene said.
A good example is the unemployment tax provision.
“The unemployment rate was going up, then it went down, and then at the last minute the unemployment rate went up,” Keene said, noting that because tax season was underway, it took at least 12 weeks for those refunds to be issued. added. Taxpayers who found something unusual when they returned waited more than a year.
read more: Are you paying taxes while unemployed? What to expect when filing your return.
The situation could be similar this time around, with final consideration of the deal delayed by opposition from some Senate Republicans who are pushing for last-minute amendments.
The Senate is currently debating another issue, aid to Ukraine, Israel and the Indo-Pacific region, but once that process is complete, he will likely leave Washington and remain in his states during the President's Day recess. .
That means the earliest this tax bill will be considered further is likely to be the week of February 26th. Still, it remains unclear whether Senate Majority Leader Chuck Schumer will consider the bill as is or agree to move forward with amendments. If the bill is allowed to undergo changes, it will undoubtedly further delay the process and potentially even kill the agreement altogether.
Election-year politics could sink the bill, further complicating the situation for taxpayers and filers. Influential Sen. Chuck Grassley (R-Iowa) recently raised eyebrows and cast doubt on its chances of passage. he told Semaphore reporters. He feared the deal would make President Joe Biden “look good.”
“Congress' primary concern is not the convenience of tax administration,” Weinberger said. “Politics tends to be dominated by common sense deadlines.”
For taxpayers not affected by the bill, experts say they should move forward with their applications. But for others, it might be worth a little wait.
“To be honest, I'm not in a hurry to file a tax return right now,” Bong said.
Rebecca Chen is a reporter for Yahoo Finance and previously worked as an investment tax certified public accountant (CPA). Ben Werschkul is Yahoo Finance's Washington correspondent.
