IRS Admits Tax Return Processing Delays

IRS Addresses Delayed Refunds
IRS Addresses Delayed Refunds

As many taxpayers now know, this tax season has been anything but a walk in the park. The irresponsible last minute negotiations of our elected officials saved us from going over the fiscal cliff, but it also delayed the filing season by two weeks–the latest start to the tax season in history.  Even with the late start of the tax season, many forms were not ready to be accepted by the IRS.  Only last week did the IRS finally announce that all tax forms were ready to be accepted.  However, it appears the problems are now starting to show.

H&R Block (HRB) recently released a statement indicating that they mistakenly filed tax returns containing delayed forms too early.  Instead of receiving their refunds, HRB clients instead received a notification from the IRS.  Complicating this fiasco even more, is that some taxpayers refunds have been delayed but haven’t been notified.  When they contact the IRS or check the “Where’s My Refund” section of the IRS Website, they can’t even confirm that their tax return has been received or even being processed.  Furthermore, these problems are not limited to HRB clients.  Popular Do-It-Yourself tax programs like TurboTax and other tax pros are reporting similar delays.

@taxgirl reported that the IRS is attributing the problems to the revamped form 8863:

This weekend, the IRS announced that the revised form 8863 appears to be giving taxpayers fits. The revised form included check boxes at lines 23-26 which were added to confirm basic qualifications for taxpayers claiming this credit. They look like this:

Look familiar? According to IRS, if you don’t check the boxes, “there will be a delay in the processing of the taxpayer’s return.” Apparently a number of taxpayers are overlooking the check boxes, causing the delays.

It is still early, and I expect this problem to be more widespread and caused by more factors than are being reported.  When you factor in the delayed filing season, delayed forms, extra due diligence for lower income taxpayers claiming the Earned Income Tax Credit, the sudden and unexpected halt to the IRS’ Paid Tax Preparer registration & continuing education requirements, the IRS transitioning solely to it’s new Electronic Filing system and the well documented and increased instances of Fraud & Identity theft hitting the IRS, there is a recipe for disaster and some serious refund delays.  Stay tuned… 

UPDATE 3/12/13:

As many as 3 Million taxpayer could be affected by these delays.  What is most frustrating taxpayers is that they received notification that their tax return was accepted many weeks ago, yet when they check “Where’s My Refund” there is no information.  This is being dubbed the form 8863 “Debacle” by some.  The news is even worse for H&R Block clients.  HRB is claiming that the IRS did not make them aware of the changes made to the 8863.  So what was supposed to be a couple week delay is now taking “a few more weeks” on top of the initial delay.

Sources: Forbes & ABC