8960 or Fight! -- By James Taranto, The Wall Street Journal

(text from within article)

Actually, Intuit has incorporated the form into its software. But for the moment, it won't allow users to complete a return that includes an 8960. An AnswerXchange moderator answers the query by explaining that in response to complaints from users--some of whom have switched to other tax-prep software to get the job done--"we will enable the filing of Form 8960 late on Feb. 26 (or possibly early the next morning) based on draft instructions."

But the moderator warns: "If you make the decision to file now, you may need to amend your return if the final instructions produce a tax liability different than the liability computed using draft instructions. You assume responsibility for checking for product updates to determine if the final instructions require an amended return and for paying any additional tax and interest."

It's a no-win for Intuit and for impatient TurboTax users. By preventing the filing of returns that include an 8960 until the IRS releases the final instructions, the company was protecting its customers from the risk of misfiling--and itself from the backlash that would surely ensue if many filers end up having to amend their returns as a result. The company still ended up with a backlash, its response to which could yield another backlash if the final instructions turn out to be different enough from the draft that a large number of users have to amend their returns.

With the filing deadline not until April 15, why would a taxpayer be eager to file in February? Presumably because he is due a refund and wants his money back as soon as possible. By contrast, if you owe money to the government, it is in your interest to wait until the deadline--the latest date on which you can file without paying interest or penalties on taxes underwithheld.

As we noted last year, taxpayers experience a refund as a windfall, but that's an illusion. In reality overwithholding of taxes is an additional tax in the form of an interest-free loan to the government. By delaying its final instructions and thereby creating a bottleneck that prevents some taxpayers from filing early, the IRS has effectively imposed a new tax.

There's no reason to think that's the intent behind the delay, for which bureaucratic inefficiency seems to us a sufficient explanation. But given that the new tax was enacted years in advance--ObamaCare became law March 23, 2010--the IRS's sluggishness seems especially noteworthy, and unnecessary.

It also raises a worrying question about the changes in tax law that took effect at the beginning of this year, the effects of which taxpayers will see when they file their 2014 returns early next year. The IRS is charged with administering the insurance "mandate" tax and the income-based ObamaCare premium subsidies. The latter is a considerably more complicated provision than the net investment income tax. The former may be as well, especially given the exceptions and waivers the administration has decreed to compensate for the botched rollout of the ObamaCare exchanges (and the possibility of more to come).

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