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Tax refunds could face debt ceiling delays

By Kay Bell · Bankrate.com
Thursday, February 6, 2014
Posted: 2 pm ET

With the start of the 2014 tax-filing season delayed until Jan. 31, tens of thousands of taxpayers already have had to wait longer than planned for their federal tax refund.

Now those refunds could be threatened by the debt ceiling fight.

Debt deadline nigh

The debt ceiling is the limit on the amount of money that the United States can borrow to pay its bills. Last October, as part of the deal to reopen the federal government, the limit was suspended through Feb. 7. Treasury Department Secretary Jack Lew says his office can finagle things using so-called "extraordinary measures" to keep the country from defaulting on its bills through the end of this month.

But when the day finally comes in late February when the federal government must pay its bills but can't unless it borrows more money, we are in big trouble.

And, say House Ways and Means Democrats, so are taxpayers who are waiting on their refunds.

Refunds delayed?

U.S. Rep. Sander Levin, D-Mich., the ranking Democrat on the tax-writing committee, wants a clean debt ceiling bill passed as quickly as possible. A clean bill would simply approve an increase in the debt ceiling, something that used to happen with regularity before the country became so politically polarized.

In recent debt ceiling debates, however, Republicans have demanded other fiscal concessions before agreeing to up Uncle Sam's ability to borrow money to pay his bills.

Levin and his 15 Democratic Ways and Means colleagues sent a letter this week to House Speaker John Boehner, R-Ohio, warning that the GOP's insistence on holding up the debt limit increase could be even more disastrous since this debt ceiling deadline is smack dab in the middle of the annual tax-filing season.

"Failure to act quickly will endanger our economic recovery and send a signal to American taxpayers that their refunds may be in jeopardy, potentially raising unnecessary panic among families awaiting their tax refunds (nearly 110 million refunds of $2,700, on average, last year)," wrote the Ways and Means Democrats.

Basically, the tax refunds are lined up to be paid out, but if the Treasury has no money to cut the checks, the distributions just stop.

Political debt ceiling chicken

Boehner and other Congressional Republican leaders say they don't want the nation to go into default. But they are playing political chicken not only with Democrats and the president, but also with the staunchest right-wing members of their party.

Essentially, GOP leaders on Capitol Hill must at least look like they are fighting the good debt limit fight before agreeing to hike the debt limit.

Just how long this political Kabuki will continue is the question.

Taxpayers awaiting refunds hope the show doesn't last long.

Are you getting a refund from the Internal Revenue Service? Who would you blame if it's delayed even longer?

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Veteran contributing editor Kay Bell is the author of the book "The Truth About Paying Fewer Taxes" and co-author of the e-book "Future Millionaires' Guidebook."

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8 Comments
DL
February 11, 2014 at 7:07 pm

"The debt ceiling is the limit on the amount of money that the United States can borrow to pay its bills."

Let's think about that for a second. I can't afford to pay my bills, so I borrow some money. Now I have another bill that I must pay and to pay it I will borrow some more money. Now I have another bill that I must pay and to pay it I will borrow some more money. Now I have another bill that I must pay and to pay it I will borrow some more money. Now I have another bill that I must pay and to pay it I will borrow some more money. Now I have another bill that I must pay and to pay it I will borrow some more money. Now I have....

It might be time to wear some costumes and make tea in Boston Harbor again.

Black American
February 08, 2014 at 4:49 pm

I agree totally w Jerry Jones Feb 7th 7AM post!

D R
February 07, 2014 at 12:56 pm

You know that you can adjust your withholding from your pay so that they take out more/less from your paychecks? People that are filing married and have 2-3 dependents typically have more withheld from their paychecks in the first place and that is partially why they are getting more back in taxes.

jerry jones
February 07, 2014 at 7:27 am

Been paying into the system for years now. Seems like the government thinks $60,000/yr. income is rich for an individual who pays all the bills himself, cause they still want more from me at filing season.

In the meantime I see all of these couples around me getting $10-$12,000 a year back in refunds, as if the household with two incomes needs that subsidy. This system is completely unfair to the individual. I feel like I am giving my hard earned money away to others who don't work nearly as hard as I do.

I am currently evaluating my income and have determined that I will start working less, to pay in less, or receive money back in the form of refund. I am no longer punishing myself by working harder, as it gets me nowhere.

Benji Long
February 07, 2014 at 7:15 am

I for one, DO NOT receive a refund. If we don't have the money should we really be paying money out??

I'm sick of this, I always have to pay in as a single individual with almost no deductions and I can't AFFORD to pay in. It is making me POOR literally. Wake up America the current tax code is the demise of our country, as it punishes over-achievers who work a lot and rewards others who don't.

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