IRS Says Stimulus Checks Will Miss December Shopping Season

The Internal Revenue Service says a key element of the economic stimulus package now before Congress--getting a new batch of tax rebate checks out in time for the holiday shopping season--is impossible to achieve.

Even worse, the IRS warns that no matter when the checks go out, they will put the agency far behind in its regular work, probably delaying up to 23 million income tax refunds worth a total of $43 billion next year.

In a letter to congressional leaders, IRS Commissioner Charles Rossotti said issuing a new round of checks in a short time “poses an extremely high risk to the tax system” that also includes a greater chance for errors and would cost the agency an additional $58 million.

Even if the agency got definitive instructions today, Rossotti said, checks wouldn’t get out until January at the earliest. That would be too late for people to spend their checks at stores during the December shopping season, which many lawmakers have said is the goal.

The $100-billion economic stimulus plan passed Wednesday by the House included $13.7 billion in rebate checks of up to $600 for millions of lower-income workers who didn’t qualify for those mailed out earlier this year. Others who only got a portion of the full amount would get the remainder.

President Bush has endorsed the rebate check idea; Republicans and Democrats in the Senate say their version of the stimulus package will also include them. Rossotti estimated that 50 million checks would be mailed out.

Senate Finance Committee Chairman Max Baucus (D-Mont.) acknowledged the IRS concern Thursday but added that he still didn’t believe the late December goal was totally unrealistic.

“We’re reexamining it. But I do know that the faster we get it done, the faster the checks can go out,” Baucus said

Senate Majority Leader Tom Daschle (D-S.D.) told reporters Thursday that the stimulus package was “not as front-burner an issue” as other legislation, particularly government spending bills. But Baucus said it is on the “must-pass” list before Congress departs the Capitol for the year.

If the checks are approved, Rossotti said, millions of taxpayers would have to wait for their regular income tax refunds next year because IRS manpower would be diverted. Disruption would occur in processing both paper and electronic returns, resulting in delays in refunds of three to five weeks.

“This could require the government to pay interest if the delay exceeded the time required under the law for issuing refunds,” Rossotti said.

Between 9 million and 23 million refunds, worth $17.7 billion to $43.2 billion, could be delayed, he said.

To ease the problems, Rossotti suggested that lawmakers consider simply adding the new rebate to the amount taxpayers would otherwise get from their 2001 tax return, which will be due next April. Those who owe taxes would simply owe less.

“We are looking at it,” Baucus said of the IRS suggestion, which Rossotti said would involve a minimal delay in issuing of regular refunds.

Negotiations continued Thursday at the Capitol on a Senate version of the economic stimulus package.

Senate Democrats said they would continue pushing for more aid for the unemployed, including health insurance assistance, and spending on homeland security items than the House bill included.

Senate Republicans, however, decided to stick with the four main items sought by Bush: the rebate checks, repeal of the corporate alternative minimum tax, enhanced expense write-offs for businesses and acceleration of scheduled cuts in income taxes.