02/02/2013
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The fiscal cliff is still causing headaches for taxpayers. Technically, the IRS kicked off tax season Wednesday — a week later than expected, as a result of Congress’s 12th-hour deal — but tax pros say it could be weeks before many Americans can actually file their returns.
The various changes to the tax code forced payroll departments to hold off their end-of-year accounting. A fair number of taxpayers still haven’t received their W2s, experts say. Those who need to file Form 8863 to claim credits for higher education won’t be able to file until the middle of February, after the IRS finishes updating its processing systems, officials said Monday. And people claiming residential energy credits, depreciation of property, or general business credits will have to wait even longer — until the end of February at least.
The delays generally mean that early-bird filers who would normally collect tax refunds in January — $3,000 on average — won’t be getting their checks until at least mid-February, says John Hewitt, chief executive of Liberty Tax Service. “It’s causing heartache,” says Hewitt, especially for people relying on that money to pay bills.
Refunds are typically issued within three weeks from the date a return is filed, but some taxpayers will have to wait longer because of an effort by the IRS to crack down on identity theft. The agency says it has more filters in place to help spot possible fraud, and some returns will be getting a closer look, further pushing back the delivery date of those refunds.
And the shorter time frame also means taxpayers getting professional help will find themselves competing for their accountant’s attention. “They’re requiring us to do more work in a shorter period of time,” says Harlan Rose, president of the National Society of Accountants. Normally, Rose is able to prepare some simple tax returns in January before his busiest weeks kick off in February, but this year he lost that calm period — and his clients are already grumbling about the delays, he says.
To be sure, the IRS says the majority of taxpayers, or 120 million households, can start filing now. And 70% of Americans qualify to file free returns, according to the Free File Alliance, a coalition between the IRS and tax-software companies. The IRS is also offering relief to some taxpayers: Farmers and fishermen, for example, won’t be penalized if they can’t file and pay their 2012 taxes by March 1, because of the delay. The famous April 15 deadline, however, isn’t budging.
Another setback for many taxpayers: W-2 and 1099 forms, which people need to have in hand so they can file even the most basic return, have also been delayed. The forms are due to be sent out by Jan. 31, but some employers are still amending them, experts say. And while the late start may push some taxpayers to be more efficient about preparing their returns, it could lead others to drag their feet, says Laura Stack, a productivity and time-management expert based in Denver. “Now they have an excuse for putting off all the things they could be doing,” says Stack, such as gathering receipts and filling out the forms they do have. “It’s a classic time-management dilemma."
