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IRS to Start Processing Delayed Returns on Feb. 14; Most People Unaffected and Can File Now
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Video: Tax Season Delayed for Some Taxpayers: English
IR-2011-7, Jan. 20, 2011
WASHINGTON — The Internal Revenue Service plans a Feb. 14 start date for processing tax returns delayed by last month’s tax law changes. The IRS reminded taxpayers affected by the delay they can begin preparing their tax returns immediately because many software providers are ready now to accept these returns.
Beginning Feb. 14, the IRS will start processing both paper and e-filed returns claiming itemized deductions on Schedule A, the higher education tuition and fees deduction on Form 8917 and the educator expenses deduction. Based on filings last year, about nine million tax returns claimed any of these deductions on returns received by the IRS before Feb. 14.
People using e-file for these delayed forms can get a head start because many major software providers have announced they will accept these impacted returns immediately. The software providers will hold onto the returns and then electronically submit them after the IRS systems open on Feb. 14 for the delayed forms.
Taxpayers using commercial software can check with their providers for specific instructions. Those who use a paid tax preparer should check with their preparer, who also may be holding returns until the updates are complete.
Most other returns, including those claiming the Earned Income Tax Credit (EITC), education tax credits, child tax credit and other popular tax breaks, can be filed as normal, immediately.
The IRS needed the extra time to update its systems to accommodate the tax law changes without disrupting other operations tied to the filing season. The delay followed the Dec. 17 enactment of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, which extended a number of expiring provisions including the state and local sales tax deduction, higher education tuition and fees deduction and educator expenses deduction.
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H.B. 58 (Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010)
The following is changes made to the Internal Revenue Code into Ohio law from the Ohio General Assembly: On December 17, 2010, just two days after former Gov. Strickland signed Sub. H.B. 495, federal tax law changed with the passage of the “Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010”. Because of the two-day lag, any federal income tax deductions for federal adjusted gross income with respect to individuals and any income tax deductions with respect to trusts and estates that were not a part of the IRC on December 15 must be added back on Ohio income tax returns.
Examples of such necessary add-back adjustments include the tuition expense deduction, tax-free distributions from IRAs for charitable purposes, the teacher classroom expense deduction, and the additional bonus depreciation expensing in lieu of yearly depreciation expense.
Unless the Ohio General Assembly and the Governor again amend the ORC, not only will many taxpayers have to make “add-backs” on their year 2010 income tax returns, they will have to maintain separate “Ohio basis” records with respect to assets placed in service after September 8, 2010. That date, per the new federal tax law, is when bonus depreciation expensing increases from 50 percent to 100 percent. Further, timing is critical because CPAs across the state are already engaged in tax preparation for the 2010 tax year.
These add-backs are complicated and costly to taxpayers, resulting in increased compliance burden and additional tax liability. Clients would be forced to maintain additional records for each taxing entity, which in this case would require separate depreciation schedules for the Ohio return. It is also important to create conformity between the ORC and IRC with respect to the federal election of 100 percent bonus deprecation. The taxpayers affected by the 100 percent bonus depreciation deduction are those investing in the current business economy. Conformity would provide them with the same tax saving benefits at the state level that they receive at the Federal level.
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First Time Homebuyers Credit
The IRS today released information on processing issues that are impacting a small percentage of tax returns involving repayment of the First Time Homebuyer Credit (FTHB), primarily involving 2008 home purchases. While most of these returns are processing normally, the IRS recognizes the hardship caused by delayed refunds and it has assigned additional staff and resources to address the issues promptly.
1. Married Filing Joint taxpayers who received the FTHB credit on a 2008 purchase
The IRS projects that some of these taxpayers will receive their refunds as soon as April 5 and others the following week.
2. Taxpayers who received the FTHB credit and are now reporting the sale or disposition of their home
The IRS projects that taxpayers in this situation should receive their refunds by the end of April.
3. Taxpayers who received the FTHB credit and are attempting to pay back more than the amount required (typically $500)
The IRS projects that taxpayers in this situation should receive their refunds by the end of April.
The time frames above assume there are no other issues impacting the taxpayer refund, including federally mandated offsets to refunds.
It is important to note that taxpayer returns claiming a home purchase in 2010 are not affected, and those returns are being processed as are the vast majority of other homebuyer returns. Additional information is available on IRS.gov.
Because the IRS is aware of the issue and working to resolve it, taxpayers do not need to contact the Service regarding this matter. The IRS apologizes for any inconvenience.
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