Budget cuts and ID thefts causes delays for the IRS

 

Reports coming from different sources are revealing that this year a lot of residents and non-residents of the USA are experiencing delays when it comes to receiving of their income tax refunds. But what triggered this and how long can it take before the returns are fully processed and the refunded money are sent to the people?

But before doing any further analysis of the current stage of the problem, it is essential to try to find what caused all of this. And, without doubt, the main reason are the budget cuts for the agency. The data published from TIGTA Conference Report says that “IRS has achieved $1 billion in budget cuts and efficiencies since 2010” and also “travel and training expenses are down more than 80 percent since 2010”. In order to do so, they also increased the use of virtual meetings and trainings to cut costs - mainly from traveling. They say that “we did not hold any similar, large-scale nationwide meetings like these in 2011, 2012 or 2013, and we do not have any plans to do so going forward.”

How it is looking this year so far? IRS, due to those budget cuts, did not worked 4 days until now - on May 24, June 14, July 5, July 22, and will be closed on August 30. It is worthy saying that the cuts are estimated to nearly $1 billion in two years with more than $600 million from sequestration from March. Of course, the agency denies that all of this impacted the service. The whole picture is not getting better with the Congress threating to cut the IRS budget with nearly 25% the next fiscal year.

The said immediate sequestration had its negative effects, that is for sure, but the decision by theInternal Revenue Service to push back the start of the filing season did not helped as well. It was supposed to start on January 22, but was postponed with 8 days to January 30 2013.

 

Another aspect of the delay is the massive anti-fraud campaign targeted at the ID thefts, claiming illegally income tax refunds. According to the Treasury Inspector General for Tax Administration, until 29th of June, IRS had exposed nearly 1.9 million incidents of the fraud which is almost double from the same period of the fiscal 2011. The reported increase from 2012 to 2013 is around 65%.

As a effect of those budget cuts and anti-identity theft programs, a lot legitimate income tax returns are experiencing delays with some of them having more than 4 weeks added to the usual time frame. So far, IRS processed 590,000 fewer returns as of May 10. When it comes to the the issued refunds, they are 1.44 million less compared to the ones from the previous year.

Having answered the first question from the headline, we still cannot predict how long it will take IRS to process the remaining returns. Our hopes are with them to succeed in the near future since a lot of the people, mainly those with low income are relying on those money.

Visa delays in Canada

After the successful past year (2012) for the international students in Canada, the recent strikes might have caused delays for the on-going processing of visas for the foreign students and tourists.

We already mentioned that year 2012 was a success in terms of newly arrived international students in Canada. The numbers had exceeded 100 000 people - this is reported as a huge increase since the past years (Source: Citizenship and Immigration Canada).

For the past months, there were numerous of strikes organized by the Canadian Foreign Service officers, demanding for wage adjustments and resumption of contract negotiations with the Canadian government. So far, the effects of this is a reported delay of up to 6 weeks in the processing of study and tourist visas. Obviously, this can result in less interest from foreigners, planning to visit and/or study in Canada for the coming months. As for tourism, the Tourism Industry Association of Canada reported potential loses of CAD $280 million for 2013.

Depending what course of action will be adopted by the government will determine where exactly those people will go. The United States of America as a near country and with their immigration reform currently being considered, might be the alternative for them.

It is clear that all of this can cause negative effects on the Canadian economy in long term, so all we can do is hope they overcome those problems and continue the good practice from the past years in terms of foreign students and tourists.

The average tax refund from Canada is $950 CAD. You can apply for Canadian tax refund with us now.