NEW YORK ( TheStreet)--How the mind worries at tax time with mounting pressure as deadlines wind down and paperwork piles up. But this year with the arcane sequestration, people are moving beyond their traditional phobias.
According to a
GfK survey conducted on behalf of
MainStreet, 3 in 10 Americans (31%) fear there will be a tax refund delay because of the sequestration, while another 1 in 5 (20%) expressed concerned there might be a problem in obtaining tax forms because of the sequestration. About 1 in 5 (18%) also say they have the perennial fears of an IRS audit, and more than one-third (36%) of respondents say they are concerned about the possibility of owing more taxes this year than they had thought.
Some surmise that a feeling of ignorance about the sequestration and beyond may be exacerbating people's on-edge feeling.
"I wonder if it's just confusion," said William Congdon, an economist at The Brookings Institution specializing in the application of insights from behavioral economics.That can add fuel to the tax season fire. "As with anything people don't understand and can't control anxiety runs high," said Kit Yarrow, a consumer research psychologist and professor at Golden Gate University. "And anxiety by nature often interferes with logic." The confusion over the legislative shifts and tax bracket minutiae can inhibit people's ability to analyze the changes--and their economic implications--in a clear-headed manner. "I don't think many really understand how their lives will be impacted," Yarrow said. "They search for clarity and the logic portion of anxiety gives rumors a leg up. Already trust in the government is abysmal, and I think it's been compounded by the politicizing and lack of clarity about the ramifications of the sequester." Tax forms have always been confusing, burdensome. The IRS has, since its inception, long been a specter for people come April. But the confusion and lack of trust are especially high given how in the dark people seem to be. Dan Ariely, a professor of psychology and behavioral economics at Duke, agrees that there is not this intangible general fear but a compromised faith in the government's ability to manage changes. "I don't think the question here is fear," he said. "Fear is, 'you see a tiger, and you become afraid.' I think here is a reduction in trust. And trust is about the fact that the other party is not acting according to the rules and acting in a random and unreliable way."
To Ariely's eye, the government and IRS have created an "erosion of trust" with the populace by introducing these policy jukes and pivots. To some degree, there is a legitimate basis to this fear. Tax filing season, for instance, was delayed at least 10 days because of extended delays in negotiating the fiscal cliff. Those negotiations caused the IRS to delay the publication of many tax forms. The IRS did not know what rates to apply until the negotiations in Congress were over, which meant you couldn't even file your tax return until January 30, 10 days later than last year and even later than the long term average. "And it really did hurt consumers who definitely missed their refund checks of $600-$800 on average," said Robert Johnson, director of economic analysis at Morning Star. "In short term dollars, that was a bigger deal than the payroll tax hike." Of course those were the result of the fiscal cliff, which has added to the confusion. The sequester, in reality, should not have any impact on forms, filing or refunds. But the paranoia has endured. "My guess is that people are confusing fiscal cliff issues," Johnson said. "That's not to say that some IRS office somewhere might be blaming the sequester for an out of stock form." Of course, the more things change, the more they stay the same. "The IRS was already a mess, even without the sequester," said Maggie Mayer, a CPA and the owner of Mayer & Associates in Madison, Conn. The fears, although amplified in the legalese and bureaucratic mumbo-jumbo, have been inevitable. "The IRS is already understaffed, misapplying taxpayer payments - or putting them in suspense accounts, but not notifying the taxpayers for months, and in some cases, years," Mayer said. "They are generating incorrect notices like crazy."
If somehow in this confusing tax year people do get an unexpected tax return, they're not going to on a shopping spree: only 2% of respondents said they would splurge on clothes or electronics compared to 30% who said they would save or invest the money.