By: Robert McCabe
Congress might have averted the “fiscal cliff,” but its last-minute action has created some big headaches and questions for tax filers.
“There’s a couple of impacts that I’ve never seen – this is my 44th tax season,” said John Hewitt, founder of Virginia Beach-based Liberty Tax Service and Jackson Hewitt, two of the nation’s largest tax-preparation companies.
Those who want to file a 1040 form electronically – the option favored by more than 90 percent of taxpayers – can’t do that yet because the Internal Revenue Service hasn’t signed off on finalized forms.
“Right now, a 1040 can’t be released,” Hewitt said. “It has a watermark on it saying, ‘Do not file.’ “
Filing paper forms probably won’t be possible until the end of the month, he said.
Taxpayers who like to knock out their federal and state returns together – whether filing themselves or using a tax preparer – face further delays because many of the states that collect income taxes don’t have their forms ready either.
“Typically, as of Jan. 3, we would be ready to go and fully tested in all the states that have income taxes,” Hewitt said in an interview Thursday. “Well, this year, only about a dozen of the states are ready to go because they’ve all been waiting on the federal government to act before they can finalize their forms and tax rates and so forth.”
Virginia will be ready by Monday, Hewitt said.
An IRS spokesman said Thursday that he could not say when new forms would be approved or whether there would be any adjustment of key dates for tax filings.
“Those decisions are under way and should be coming out relatively quickly, so stay tuned,” he said.
New legislation such as the fiscal package just approved by Congress needs to be reviewed, and IRS computer systems need to be configured to adhere to the bill’s provisions, the IRS spokesman said.
“These things don’t happen in a matter of hours; it takes days.”
Months ago, the Internal Revenue Service set Jan. 22 as the start date for the filing of electronically transmitted, computer-generated tax returns – the latest start date since electronic filing began in the late 1980s, Hewitt said.
“Those people that want their money quickly, that want their money in just a couple of weeks, are going to get it a week later than at any time since electronic filing was invented 25 years ago,” he said.
Carolyn Buzek is a Jackson Hewitt franchisee with eight offices in the Hampton Roads area.
“The IRS gets a bum rap in a lot of cases,” she said, adding that “everybody blames them for why you can’t file.”
“Well, it’s really Congress that makes the decisions, and the IRS has to scramble and try to figure out when you have the wording,” Buzek said. “Some of this is getting pretty complicated.”
California-based Intuit, maker of TurboTax, offers both online and desktop products enabling taxpayers to file their own returns. Electronically completed forms are transmitted to the company, which sends them to the IRS when it’s ready to receive them, Ashley McMahon, a spokeswoman, said Thursday.
Both products include prompts instructing users to download updates.
Hewitt said one of the biggest burdens his company will face this year is having to deliver the bad news to some customers that they will be getting their refunds late.
“These are people who live paycheck to paycheck,” he said, adding that they typically get returns averaging about $3,000.
Another burden is internal, affecting the biggest component of Liberty’s workforce – about 100 computer programmers.
Typically, they get information in October from the states with income tax.
“They have from October to January to get ready,” Hewitt said of his company’s programming staff. “Well, now we have only a few weeks to get ready.”
Hewitt said U.S. taxpayers are facing a situation “unheard of in the annals of tax preparation.”
“I don’t think Congress really understood the impact of what’s going to happen with tax filing this season,” he said. “Maybe they didn’t care.”