Why The IRS Is Forcing Many Taxpayers To Wait Before Filing

by Khaleef Crumbley on January 11, 2011

in Taxes

Income Tax Filing Delay

According to an IRS bulletin, about 50 million taxpayers will face an income tax filing delay this year. If you itemize your tax deductions, then you will have to wait until mid to late February in order to file your tax return.

The Reason For The Income Tax Filing Delay

The reason for the income tax filing delay is that since Congress waited until the last possible minute to make decisions regarding the tax code. The tax bill wasn’t signed into law until December 17, 2010! This means that the IRS now is forced to scramble to reprogram their systems with all of the details of the new tax law.

Who Will Be Affected By The Income Tax Filing Delay?

According to the IRS:

Some taxpayers – including those who itemize deductions on Form 1040 Schedule A – will need to wait to file. This includes taxpayers impacted by any of three tax provisions that expired at the end of 2009 and were renewed by the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act Of 2010 enacted Dec. 17. Those who need to wait to file include:

  • Taxpayers Claiming Itemized Deductions on Schedule A. Itemized deductions include mortgage interest, charitable deductions, medical and dental expenses as well as state and local taxes. In addition, itemized deductions include the state and local general sales tax deduction that was also extended and which primarily benefits people living in areas without state and local income taxes. Because of late Congressional action to enact tax law changes, anyone who itemizes and files a Schedule A will need to wait to file until mid- to late February.

  • Taxpayers Claiming the Higher Education Tuition and Fees Deduction. This deduction for parents and students – covering up to $4,000 of tuition and fees paid to a post-secondary institution – is claimed on Form 8917. However, the IRS emphasized that there will be no delays for millions of parents and students who claim other education credits, including the American Opportunity Tax Credit extended last month and the Lifetime Learning Credit.

  • Taxpayers Claiming the Educator Expense Deduction. This deduction is for kindergarten through grade 12 educators with out-of-pocket classroom expenses of up to $250. The educator expense deduction is claimed on Form 1040, Line 23 and Form 1040A, Line 16.

Most of my clients itemize deductions (filing Form 1040 Schedule A) and thus will be affected by this income tax filing delay.

Options For Those Subject To The Income Tax Filing Delay

There is some good news and bad news here. The good news…many tax preparation software vendors have already updated their programs with the latest updates and extensions of the tax code. This means that you should be able to file your return now.

For instance, TurboTax announced in a recent blog post, that they will allow you to file your returns beginning on January 6th:

Even if you are claiming one of these deductions, don’t wait to start your return. TurboTax products are already up-to-date with all the latest forms and schedules. You can prepare your return with TurboTax and electronically file it beginning on Jan. 6.

TurboTax will securely hold your return until the IRS begins accepting returns impacted by the processing delays. TurboTax will send you an email confirmation that your return has been e-filed and accepted by the IRS.

The bad news is that even if you are able to file early, the IRS will not begin accepting returns until all of their systems are updated!

I have used TurboTax and other Intuit products in the past, and I have no problem recommending them. Of course, if you are looking for professional tax preparation, then contact us to schedule an appointment.

***Update: The IRS has announced when the income tax filing delay will be over, and when they will begin accepting returns (read here to get the details)!***

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photo by alancleaver_2000

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© 2011, Khaleef Crumbley. All rights reserved.

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