Tax tip: Glitch delays 660,000 refunds


Blank U.S. Treasury checks are seen on an idle press at the Philadelphia Regional Financial Center, which disburses payments on behalf of federal agencies.The Internal Revenue Service says 660,000 taxpayers will have their refunds delayed by up to six weeks because of a problem with the software they used to file their tax returns. (The Associated Press)

Published: Wednesday, March 20, 2013 at 1:53 p.m.
Last Modified: Wednesday, March 20, 2013 at 1:53 p.m.

The Internal Revenue Service says 660,000 taxpayers will have their refunds delayed by up to six weeks because of a problem with the software they used to file their tax returns.

The delay affects people claiming education tax credits who filed returns between Feb. 14 and Feb. 22.

H&R Block, the tax preparing giant, says that some of its customers were affected, but the company has resolved the problem. A limited number of other software companies have also had problems, but IRS spokeswoman Michelle Eldridge declined to name them.

Turbo Tax customers were not affected, said spokeswoman Julie Miller.

The IRS expects to process about 150 million tax returns from individuals, so less than 1 percent will be affected. About 6.6 million taxpayers are expected to claim the education tax credits.

The software problem was on Form 8863, which is used to claim the American Opportunity credit, which provides up to $2,500 to help pay for college expenses, and the Lifetime Learning credit, which provides up to $2,000.

The form includes a series of questions. On some of the questions, if the taxpayer answered "no," the answer was left blank when the form was electronically transmitted to the IRS.

H&R Block said the forms were filled out correctly but the answers were dropped when the forms were transmitted to the IRS.

"It's important to note that the tax returns were prepared accurately. The error occurred in e-file processing," H&R Block said in a statement. "We are communicating directly with our impacted clients to assure them that we are doing everything we can to expedite their returns."

The IRS has long had a goal of increasing the number of people who file their tax returns electronically. The agency promises faster refunds for people who file electronically and have their refunds deposited directly into bank accounts. Most taxpayers who file this way can get refunds within 21 days, the agency says.

In 2012, nearly 120 million taxpayers electronically filed their federal tax returns with the IRS. That's about 81 percent of all individual returns.

Taxpayers can check the status of their refund on the agency's "Where's my refund?" website. The IRS says the status of a refund is only updated once a day, usually at night.

Last month, the agency asked taxpayers not to check the website more than once a day because it was being overwhelmed by eager taxpayers.

To find out the status of your refund, visit http://tinyurl.com/b5ocufa.

2009 refunds

If you didn't bother filing a federal tax return for 2009, it might be a good time to rethink your tax strategy.

The Internal Revenue Service says it has $917 million in unclaimed tax refunds from 2009, and time is running out to claim them. The refunds are owed to nearly 1 million people who failed to file returns for 2009. Taxpayers must file their 2009 returns by April 15 to claim their refunds. If taxpayers don't file returns, the law says they have a three-year window to claim refunds. After that, the money becomes property of the U.S. Treasury.

The IRS says there is no penalty for filing a late return that qualifies for a refund. But the agency says refunds may be delayed if taxpayers also failed to file returns for 2010 and 2011.

The government can also withhold tax refunds to settle unpaid federal and state taxes, as well as unpaid child support and past due student loans.

People in every state and the District of Columbia are owed refunds, including 100,700 people in California and 86,000 people in Texas, the IRS said. Most of the refunds exceed $500.

Some people may not have filed tax returns because they made too little money and weren't required to file, the IRS said. However, if they had federal income taxes withheld from their pay, those people may be entitled to refunds.

Also, many low- and middle-income people who didn't file returns may be missing out on the Earned Income Tax Credit. In 2009, a married couple with three or more children could earn up to $48,279 and qualify for the credit. Income thresholds are lower for couples and single filers with fewer children.

For more on unclaimed refunds by state, visit http://tinyurl.com/atk4kd7.

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