Impending Y2K-like chaos neither candidate is addressing

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The neediest Americans will be short $100 billion in delayed tax refunds at a time when they're really counting on it. Chaos may ensue, an issue neither presidential candidate is addressing.

In June, I sounded the alarm on How Congress is About to Screw Up the Economy in an Unprecedented Way. The more we learn about the PATH Act of 2015, however, the louder this alarm needs to be.

I'm now calling it Y2K for the Tax Industry.

First, a short primer on what's happening. The PATH Act stands for Protecting Americans from Tax Hikes. As a headline, it sounds commendable and does include legislation for more than $620 billion in tax reductions for families and businesses.

Unfortunately, the PATH Act also means a delay in millions of refunds. It is now against the law for the IRS to issue a refund before February 15 to any taxpayer who is claiming the Additional Child Tax or Earned Income Tax Credit. Congress has allowed this delay in order to give the IRS more time to detect possible fraud.

The Earned Income Tax Credit is a benefit for working people with low to moderate income and, by our estimate; the new rule could affect 30 million taxpayers by delaying more than $100 billion in refunds.

RELATED: Anyone who's filed taxes will relate to these 10 quotes

11 PHOTOS
10 things we've all said while filing our taxes
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10 things we've all said while filing our taxes

"It's only January, I have plenty of time!"
You're relaxed, you're casual, what even are taxes anyway? You don't care! It's so far away that filing taxes isn't even remotely on your radar, to be honest.

Photo credit: Getty

"The imminent act of filing is upon me and I literally have nothing ready..."
Tax season is now approaching and that creeping anxiety about getting everything done on time is starting to set in. It's essentially biting at your heels and you know you have to get moving.

Photo credit: Getty

No words. Just emotional paralysis.
You're screwed. You need to start doing your paperwork but you physically do not know where to even begin. It's time. It's happening.

Photo credit: Getty

"I HAVE A MILLION THINGS I NEED TO DO, WHY ARE THERE SO MANY PAPERS AND QUESTIONS, SOMEBODY HELP ME!"
That anxiety you felt creeping in earlier? Now it's full-fledged onset. This stage is often accompanied by screaming out loud, pulling hair, crying, etc.

Photo credit: Getty

"Wait, did I get all of my papers in? Did I check that one box correctly? Does it look like I'm trying to evade some of these taxes? What if I go to jail? Can I go to jail for that? WHO WILL FEED MY DOG WHEN I AM IN JAIL?!"

It's like handing in an exam in school and wishing you could grab it back and double check your answers one more time.

Who was that celebrity you heard about that went to jail for tax evasion? Because now you're convinced that's totally going to be you.

Spoiler alert: as long as you did everything to the best of your knowledge and ability, you probably won't go to jail. And even if you do, you'll find someone to walk your dog.

Photo credit: Getty

"I got this, I'm almost done, a few more papers and I'm in the clear. I just have to pound through the rest of it. Go me!"

"Go you" is right! Now you're on cruise control and you're on track to get everything done well and on time. You're unstoppable in the delight of the world that is tax filing.

Photo credit: Getty

"Thank god that's over with, now I can relax! What to do with all this stress-free free time!"
Finally, relief. Your papers are filed and sent out into the universe. It's off your back at last. Now on to more important things, like Netflix.

Photo credit: Getty

"When is my return coming? Is this going to be my life for the rest of my life? Yep, it is. So about that return..."
Now, you wait. You want that money. And the inevitable truth that your life will now be a neverending cycle of filing taxes and waiting for your return.

Photo credit: Getty

"SCORE my return was so much better than I expected! I'm buying a new dress. Or five. Probably five, why not?"
You're on a total life-high now. The possibilities of what you can spend your return on seem endless and even if you don't, having a nice bonus hunk of cash in your pocket feels pretty good. It made all of that stress completely worth it.

Photo credit: Getty

"Honestly filing wasn't even that bad this year. And now I don't have to think about it anymore. Well at least not for another year. But no use in worrying about that now!"
Alas, acceptance. You know you'll fall victim to the vicious cycle again when next year rolls around. But truthfully, you wouldn't have it any other way. Okay, you obviously would. But you'll never change your procrastinating ways!

Photo credit: Getty

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The question many taxpayers will be asking this season is "Where's My Cash?"

While the February 15 date creates a timing problem for our nation's economy, there will be additional problems that Congress clearly hasn't thought through. These checks will need to be cashed. Word on the street will be that taxpayers can get their refunds on the 15th. The fact is, banks don't keep that kind of cash on hand to serve millions of customers all at once.

Many clients cash their checks at Walmart or another check-cashing service, especially if they don't have a bank account. These organizations also don't keep that amount of cash available to serve this large number of consumers in one day. In other words, you may be holding a check that you simply can't cash right away.

RELATED: Comparing presidential candidate proposed tax plans

Computer system overloads could create more delays. This is the other reason I'm calling this Tax Y2K: a potential software glitch and/or system overload that could result when the IRS sends tax preparers a computer file that is at least 6 times larger than normal. This computer file contains information about the refunds due customers of that tax preparer.

Think of this as a massive download of information impacting $100 billion in refunds, all on one day. This needs to be processed by the IRS systems, tax preparers and the banks. Additionally, many check cashers use systems that help authenticate the check. These systems may not be capable of handling the massive volume, further slowing the process of customers getting their cash.

There's one more factor to add to this perfect storm. Historically, the IRS issues refunds to 85% of the taxpayers right away; 15% of the projected refunds are held for further checking; they may have back taxes or other issues that need to be investigated. Yet another delay to the already delayed tax returns.

Get the picture? If there is a line down the block with 100 people waiting for their money on February 15th, an estimated 15 will go home empty handed. How do you think these people will feel and why does this matter so much? In June, I wrote about the impact on the poorest in this country.

We call it Tax-mas.

For Congress, we should just call this bad timing. Clearly, our lawmakers haven't considered the economic impact of tax refunds to American citizens. Neither presidential candidate is addressing this problem.

Think about it. Or maybe you've lived it. In order to have a better Christmas, many people don't pay their January rent on time; they catch up with their refund. Now they may be late on both January and February rent, creating a domino effect for both renters and landlords.

RELATED: Federal taxation over time

In my experience, more than half of all American citizens rely on their tax refund to catch up on holiday bills or just provide food for their families. This is also the time millions of Americans go shopping. This delay will impact discount stores such as Walmart and Target, cell phone companies and other businesses which usually bring in billions of dollars in revenue in late January because of the tax refunds.

February 15th - Y2K for the Tax Industry.

Unlike in 2000, when the fear of a massive computer crash was averted, unless Congress makes changes to this plan-- better yet, repealing the PATH Act-- chaos is a given.

For your family, plan for delays now and, hopefully, you can avert this crisis in your own home and business.

RELATED: Important tax dates to know

11 PHOTOS
Important tax dates to know
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Important tax dates to know

January 15, 2016: Those who are self-employed or have fourth-quarter income that requires payment for quarterly estimated taxes must have them postmarked by this date

(Photo via Tetra Images/Getty Images)

April 18, 2016: Individual tax returns are due for the 2015 tax year

(Photo via Alamy)

April 18, 2016: Requests for an extension on filling out your taxes must be filed by this date

(Photo by Chris Fertnig via Getty Images)

April 18, 2016: Those who are self-employed or have first-quarter income that requires payment for quarterly estimated taxes must have them postmarked by this date

(Photo via Alamy)

April 18, 2016: This date is also the deadline to make a contribution to an IRA account for 2015

(Photo by Garry L., Shutterstock)

June 15, 2016: Those who are self-employed or have second-quarter income that requires payment for quarterly estimated taxes must have them postmarked by this date

(Photo via Shutterstock)

September 15, 2016: Those who are self-employed or have second-quarter income that requires payment for quarterly estimated taxes must have them postmarked by this date

(Photo via Shutterstock)

October 17, 2016: 2015 tax returns that received an extension are due by this date

(Photo by Juan Camilo Bernal via Getty Images)

October 17, 2016: Today is the last chance to recharacterize a traditional IRA that was converted to a Roth IRA during 2015

(Photo via Getty Images)

January 15, 2017: Those who are self-employed or have fourth-quarter income that requires payment for quarterly estimated taxes must have them postmarked by this date

(Photo by Pascal Broze via Getty Images)

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