All I Needed To Know About Taxes I Learned From My Kids (Forbes)

My kids are on spring break this week which means we are spending a lot of time together. A lot.

In the space of a few days, I've learned some invaluable information. The best car ever made? An Audi R8, according to my six year old. A love of coleslaw? Not hereditary (I’m still reeling from this one). Can you listen to the same Taylor Swift song too many times? The answer, from both girls, a resounding no.

It’s been interesting, to say the least. But tonight, as I settled down in the armchair in my parent’s living room, reliving the past couple of days in my mind, I realized a few things. Grown-ups make things hard. We complicate issues. Sometimes, the answers really are easy. And with that in mind, I give you nine things I've learned from my kids about tax:

1. It’s okay to change your direction. More than once. As adults, we’re kind of programmed to go in one direction. And we’ll keep heading in that direction even when it’s clear that it’s the wrong direction. We think turning around is admitting defeat. But it’s not. Sometimes, changing direction means that you've figured out a better way to get where you’re going. You have to be ready to make that change. When it’s clear that you’re not going to be successful, for example, in an Offer In Compromise, it might be time to change direction and try an Installment Agreement. If you’re not getting anywhere with your efforts to challenge a potential change in your return with IRS, maybe it’s time to file a petition in Tax Court. There may be more than one way to get where you need to go, be open to changing directions.
2. Don’t cheat. My eight year old has this amazing third grade teacher. Her teacher has devised a classroom economy where the kids earn income for doing jobs and pay penalties for making mistakes. One day, she came home with eyes wide. “Mom,” she said, “This girl had to pay $50 today as a penalty.” That’s a pretty hefty fee. So I asked why. “Because she forgot to have her parents sign her homework journal.” I made a face. That wasn't a $50 penalty kind of thing. “So,” she continued, “she signed her dad’s name instead.” And that’s what got her into trouble. It was an excellent lesson. The same lesson can be applied to IRS. You rarely get into trouble for the little mistakes. Those can be fixed. You get into trouble for lying and cheating. So don’t do it.
3. Don’t be afraid of the bigger guy. My six year old started non-contact rugby this winter. Most of the kids in the league were at least a few years older and much, much bigger. On the first day, he cried because he couldn't figure out the drills. They required a level of finesse that his little six year old body couldn't master. But he dusted himself off after a crying jag, he squared his shoulders and he paid attention to the coach. And then he played his little heart out. A few games in, he got a collective cheer from all of the big guys when he made a spectacular play against a guy nearly twice his size. He didn't back down. But he was also smart: he figured out what he could master. In tax, you often have a similar match up: you against the big guy. The IRS (and other taxing authorities) can be really intimidating. And while it’s foolish to fight for the sake of fighting, it’s smart to challenge an assessment or finding that’s clearly wrong. When it makes sense to fight back, don’t be afraid to do so. But be prepared: that’s half the battle.
4. Pay attention to deadlines. Tuesday is soft pretzel day at school. That means that the kids need to remember to bring change if they want to buy a snack. Their recall of this is much better than mine. They understand that if they forget, that means no pretzel on Tuesday. And they don’t sell pretzels on Wednesday. Deadlines matter. And they matter in tax. You have to be aware of key dates – like petition deadlines, tax due dates and time frames for claiming refunds. You don’t always get a second chance.
5. When you have an empty box, you can turn it into a time machine. Or a collection box. Or a puppet theatre. For the most part, the IRS likes to see the right item placed neatly on the right line on your tax return. But sometimes, you have choices that affect your bottom line. Should you figure your tuition as a deduction or a credit? Run the numbers and see. And if you can’t make something work one way, try it another way. You might not be able to claim that Little League sponsorship as a charitable deduction for your business, for example, but it might fly as a promotional expense. Think outside of the tax box.
6. Be realistic but manage expectations. My middle daughter had long, beautiful blonde hair. It was also terribly fine and kept getting tangled. It needed to be cut. We looked at a bunch of pictures and she finally settled on this one: Emma Watson’s pixie cut. At the salon, I began to panic a bit. What if, when the cut was done, she hated it? What if if was too severe a cut for her? I gently suggested that maybe she could get one a little bit longer and if she liked that one, cut it even shorter later. She looked at me funny and said, “Mom, it’s just hair. It will grow back.” She was totally right. Sometimes we get so caught up in all of the worst case scenarios that we don’t see the bigger picture. Don’t be so scared that you fail to get what you want. If you can document those moving expenses, take them. If you qualify for the home office deduction, by all means, do it. Don’t get so caught up in the fear of audits that you don’t take the credits and deductions that you are entitled to claim. If you understand the consequences of your actions – and it still makes sense – then go for it. (For the record: totally adorable cut, we both loved it.)
7. Read everything. My ten year old never met a book she didn't like. Or newspaper. Or cereal box. And whenever she wants to know something, she reads even more. Her latest obsession is raising chickens. She desperately wants a whole coop full. So she’s read every book and magazine she can get her hands on about chickens, coops, eggs and feed. Even though she hasn't set foot inside a barn, she’s practically an expert. When the time comes, we’ll likely depend on folks who know more than she does (or we do) to make the tough choices – what kind of chickens to get, what kind of coop to have and the like. But she knows enough to make educated decisions with their guidance. You should think about your tax returns the same way. You might want to do your own returns. You might want to hire someone to do your returns. Either way, you should know enough about the tax law that applies to your situation to make smart decisions. Read newsletters, magazines (like, oh, say, Forbes) and blogs to keep you informed.
8. Stop the bleeding early. My kids ask for band-aids at the drop of a hat. A scratch or a scrape or an all-out gash: they all get the same treatment. But they may be onto something. As grown-ups, we tend to wait until things get really terrible before we ask for help. By then, it might be too late. Getting help early can keep a bad situation from turning worse. Those lost receipts? That information request from IRS? That credit that you weren't quite 100% about? Open the mail. Ask questions. And don’t wait until the last minute.
9. If you don’t know the answer, ask Grandpa. Or someone in the know. My six year old explained to me the other way that we could ask “Grandpa because he knows everything.” Having grown up with his Grandpa, I’m not so sure that’s true. (Quick, Dad! Who is Justin Bieber? Point proven.) But my son is on the right track. When you don’t know the answer, ask someone who does. That could be a phone call to IRS (1.800.829.1040). Or an email to your tax professional. But the key is to not be afraid to ask for help. Someone will know the answer.

Article originally published on Forbes.com by Kelly Phillips Erb - 03/26/2013

Security Tax Services LLC

North Sound                                       South Sound

2802 Wetmore Ave, Suite 212           33530 1st Way S, Suite 102

Everett, WA 98201                             Federal Way, WA 98003

425.339.2400                                     253.237.0751

fax 425.259.1099                               fax 253.237.0701

States, Local Governments Consider Aggressive Tax Collection Efforts To Plug Budget Holes - (Forbes)

All of the taxes in the world don’t mean a thing if you can’t collect on them – or so many states and localities are figuring out these days. Taxing authorities from Tennessee to New Jersey are reporting shortfalls and lags in collections activities just as cuts from federal funding are being felt.

Some taxing authorities are saying enough. Alternative, aggressive and controversial new proposals are popping up all over in an effort to fill budget holes.

Consider Philadelphia. The City, with Revenue Commissioner Keith Richardson taking the lead, is considering a measure that would allow the City to seize personal property to settle tax debts. Specifically, Richardson is “looking at a company that may help us to start taking people’s cars” in an effort to help collect some of the more than half-billion dollars in outstanding taxes in the city.

Philadelphia’s neighbor to the south, Delaware, is considering similarly aggressive techniques. As school districts fight for more funding, Delaware lawmakers may allow school districts and counties to secure unpaid property taxes from a person’s income tax refund. The system would be similar to the offset program already in place for priority debts like child support.

A county in North Carolina is going even further: in Jackson County, North Carolina, if you don’t pay your taxes, you could lose your house. County tax collectors are using the threat of foreclosure to collect outstanding taxes, a tactic the county hadn't used since the early 1980s. While effective – the county has collected about $1.2 million in payments from 85 individual tax delinquents – that level of aggressive collections is considered so contrary to public policy that even the Internal Revenue Service has been discouraged from the behavior.

The state of North Carolina is also being aggressive when it comes to certain kinds of personal property taxes. All county tax offices in the Tarheel State are now required to be linked to the state Division of Motor Vehicles (DMV) so that the DMV could block registration renewals on vehicles with delinquent taxes. And in Wake County, county tax officials are clearing out bank accounts in order to resolve outstanding tax liabilities on vehicles.

In Mississippi, the government has actively been seizing properties for non-payment of real estate and personal property taxes; the Secretary of State’s Office now holds more than $66.2 million of such property. Last year, the state stepped up efforts to return those properties to those willing to pay by auctioning off the properties. The state is now accepting bids, a win-win for the state: the state is paid for the properties and they get them back onto the tax rolls.

Other states and localities are making noise about collections campaigns. This year, Illinois joins the ranks of states warning that they are “aggressively focusing upon collecting” taxes. It’s a stark contrast to the more taxpayer friendly alternative, tax amnesty programs, being touted as all the rage just a few years ago.

Why take these positions? It’s simple. Taxing authorities need revenue. That essentially leaves governments with two choices: collect existing taxes or push new ones. Which one do you think is most popular?

There is a danger with these kind of tactics, however. While taxpayers and tax pros tend to agree that folks need to pay their “fair share” (whatever that means), there are serious concerns about about tax assessments and tax bills which are clearly inaccurate. The concerns are heightened when you consider that many government and tax authorities are hiring third party debt collectors to resolve outstanding taxpayer obligations. Third party debt collectors are generally paid as a percentage of taxes collected and thus have little incentive to assist taxpayers in understanding their tax debts, the appeals process or alternatives which may be available. Additionally, what is at stake with tax debt tends to be much higher than other personal debts; unlike credit card debt, for example, where the worst case scenario is often a lien or court judgment, tax debts can result in the seizure of personal property, levying of accounts or wage garnishes.

Despite those kinds of concerns, tax collection efforts are likely to become more, not less, ambitious, as the economy remains fairly flat – especially with sequestration. Revenues have to come from somewhere. Seizing cars, homes, bank accounts, wages and other property may be an easy way to collect in the short term. The real question is whether putting the squeeze on those who might not be able to pay will result in more problems down the road.

Article originally published on Forbes.com by Kelly Phillips Erb - 03/20/2013

Security Tax Services LLC

North Sound                                       South Sound

2802 Wetmore Ave, Suite 212           33530 1st Way S, Suite 102

Everett, WA 98201                             Federal Way, WA 98003

425.339.2400                                     253.237.0751

fax 425.259.1099                               fax 253.237.0701

Tax Relief Extended for Victims of Hurricane Sandy -

In the aftermath of Hurricane Sandy, the Internal Revenue Service announced additional tax relief to affected individuals and businesses, further extending tax deadlines until April 1 for the following FEMA-designated counties:

1. In New Jersey (starting October 26): Monmouth and Ocean counties.
2. In New York (starting October 27): Nassau, Queens, Richmond and Suffolk Counties.

In addition, the IRS will work with any taxpayer who resides outside the disaster area but whose books, records or tax professional are located in the areas affected by Hurricane Sandy. All workers assisting the relief activities in the covered disaster areas who are affiliated with a recognized government or philanthropic organization are eligible for relief.

This tax relief postpones various tax filing and payment deadlines that occurred starting in late October. As a result, affected individuals and businesses have until April 1, 2013, to file these returns and pay any taxes due. This includes the fourth quarter individual estimated tax payment, normally due January 15, 2013. It also includes payroll and excise tax returns and accompanying payments for the third and fourth quarters, normally due on October 31, 2012 and January 31, 2013 respectively, and calendar year corporate income tax returns due March 15. Tax-exempt organizations required to file Form 990 series returns with an original or extended deadline falling during this period also qualify for this tax relief.

The IRS will abate any interest, late-payment or late-filing penalty that would otherwise apply to any taxpayer located in the disaster area.

Contact us today if you're a taxpayer living outside of the impacted area and think you may qualify for this relief.

Security Tax Services LLC

North Sound                                       South Sound

2802 Wetmore Ave, Suite 212           33530 1st Way S, Suite 102

Everett, WA 98201                             Federal Way, WA 98003

425.339.2400                                     253.237.0751

fax 425.259.1099                               fax 253.237.0701

H&R Block CEO Offers Apology For Education Credit Fiasco (Forbes)

As tax season heads towards the home stretch, hundreds of thousands of taxpayer refunds have been delayed. While taxpayers expected minor glitches associated with a late start to the tax season, the magnitude of the delays, especially those involving the form 8863 for education credits, took the tax world by storm. Angry taxpayers have been complaining about unusually long wait times and, perhaps most frustrating, a complete lack of information about the delays and the next steps. The form was delayed for processing initially by two weeks, a wait time that Forbes writer Janet Novack suggested could have been avoided.

Last year, the IRS opened tax season early, on January 6, 2012, and accepted e-filed returns as early as January 17, 2012. Since April 15, 2012, happened to fall on a Sunday and Emancipation Day in Washington D.C. was marked on April 16, 2012, tax season was pushed all of the way out to April 17, 2012. Adding yet another day? It was a leap year. The result? An embarrassment of filing riches. The tax season was officially open for 102 days (the season for e-filing was open for 91 days).

Contrast that to 2013. Tax season didn’t open until January 30, 2013. No leap year, no holiday. The due date for returns remains April 15, 2013. The result? Tax season is open for 75 days. Same number of returns (more or less). About 75% of the available time.

Once tax season opened, almost immediately, the IRS noticed problems with some tax returns claiming education credits and issued a series of alerts. The problem didn’t get better, however, and taxpayers continued to report problems with the credits. Most of those problems appeared to be related to returns filed with H&R Block. H&R Block, for its part, remained quiet throughout much of the controversy, offering statements and updates to taxpayers on its Facebook page. This weekend, H&R Block CEO Bill Cobb issued the following apology:

Let me set the record straight about the Form 8863 issue that has affected you, our valued clients: we made a mistake when the tax return was sent to the IRS. And you deserve an apology, an explanation, and to know what we’re doing about it.

Here’s what happened: this year’s tax season started later than any in history (January 30th), followed by a further delay in form 8863 not being accepted until February 14. Not good for everyone. When the IRS began accepting the form, we immediately sent your returns, with the intention of getting you your refund as quickly as possible. In our zeal to move so quickly, we missed a step. Specifically there was a disconnect in the transmission of form 8863 from our delivery system to the IRS E-file system, and this caused the delay many of you are experiencing. We fixed the transmission issue right away, but couldn’t undo it for those that had already been sent.

I want to make it clear that this was absolutely not the fault of your tax professional; your return was prepared accurately. This was an issue with the form transmission. This was our mistake — and I sincerely apologize. I want you to know that we hear the frustration of those impacted by this issue loud and clear, and we’re working every avenue we can to get your refund to you as fast as possible.

We have been and remain in daily communication with the IRS, who are doing everything they can to speedily process all returns. We know that clients are beginning to see progress, funding dates are being communicated and refunds are definitely being funded. But we also recognize that in an already delayed season, it’s still not as fast as we want, and we’re not letting up until every client has his or her refund.

We are also committing to more frequent and regular updates with you as we have news to share, and we know we can do a better job here too.

Finally, I know an apology won’t put your tax refund in your hands right away, and many of you still have questions. But right now, our singular focus is to get you that refund, and we have all hands on deck to help make this right.

So, no update, but an apology. Will it be enough to satisfy taxpayers? You tell me.

Security Tax Services LLC

North Sound                                       South Sound

2802 Wetmore Ave, Suite 212           33530 1st Way S, Suite 102

Everett, WA 98201                             Federal Way, WA 98003

425.339.2400                                     253.237.0751

fax 425.259.1099                               fax 253.237.0701

Originally published on Forbes.com by Kelly Phillips Erb - 03/16/2013

It's Not Too Late to Make a 2012 IRA Contribution -

If you haven't contributed funds to an Individual Retirement Arrangement for tax year 2012, or if you've put in less than the maximum allowed, you still have time to do so. You can contribute to either a traditional or Roth IRA until the April 15 due date for filing your tax return for 2012, not including extensions.

Be sure to tell the IRA trustee that the contribution is for 2012. Otherwise, the trustee may report the contribution as being for 2013 when they get your funds.

Generally, you can contribute up to $5,000 of your earnings for 2012 or up to $6,000 if you are age 50 or older in 2012. You can fund a traditional IRA, a Roth IRA (if you qualify), or both, but your total contributions cannot be more than these amounts.

Note: IRA contribution limits increase in 2013 to $5,500 ($6,500 if age 50 or older).

Traditional IRA: You may be able to take a tax deduction for the contributions to a traditional IRA, depending on your income and whether you or your spouse, if filing jointly, are covered by an employer's pension plan.

Roth IRA: You cannot deduct Roth IRA contributions, but the earnings on a Roth IRA may be tax-free if you meet the conditions for a qualified distribution.

Each year, the IRS announces the cost of living adjustments and limitation for retirement savings plans.

Saving for retirement should be part of everyone's financial plan and it's important to review your retirement goals every year in order to maximize savings. If you need help with your retirement plans, give us a call. We're happy to help.

Security Tax Services LLC

North Sound                                                           South Sound

2802 Wetmore Ave, Suite 212           33530 1st Way S, Suite 102

Everett, WA 98201                             Federal Way, WA 98003

425.339.2400                                     253.237.0751

fax 425.259.1099                               fax 253.237.0701

Report 2010 Roth Conversions on 2012 Returns -

Taxpayers who converted amounts to a Roth IRA or designated Roth account in 2010 must report half of the resulting taxable income on their 2012 returns.

Normally, Roth conversions are taxable in the year the conversion occurs. For example, the taxable amount from a 2012 conversion must be included in full on a 2012 return. But under a special rule that applied only to 2010 conversions, taxpayers generally include half the taxable amount in their income for 2011 and half for 2012, unless they chose to include all of it in income on their 2010 return (filed in 2011).

Roth conversions in 2010 from traditional IRAs must be reported on either Form 1040 or Form 1040A. Conversions from workplace retirement plans, including in-plan rollovers to designated Roth accounts, should also be reported on either Form 1040 or Form 1040A.

Taxpayers who also received Roth distributions in either 2010 or 2011 may be able to report a smaller taxable amount for 2012.

Taxpayers who made Roth conversions in 2012, or are planning to do so in 2013 or later years must file Form 8606 to report the conversion. As in 2010 and 2011, income limits no longer apply to Roth IRA conversions.

If you need assistance reporting Roth rollovers and conversions that you've made in previous tax years, don't hesitate to call us. We're here to help!

Security Tax Services LLC

North Sound                                       South Sound

2802 Wetmore Ave, Suite 212           33530 1st Way S, Suite 102

Everett, WA 98201                             Federal Way, WA 98003

425.339.2400                                     253.237.0751

fax 425.259.1099                               fax 253.237.0701

Hundreds Of Thousands Of Taxpayers Thought To Be Impacted By Education Credit Snafu (Forbes)

Tax season is proving to be a major headache for taxpayers this season. And it looks like it’s not about to get better for hundreds of thousands of taxpayers who claimed the American Opportunity Credit or the Lifetime Learning Credit on their personal income tax returns.

To claim the credit, taxpayers must file a federal form 8863, Education Credits (downloads as a pdf). The Internal Revenue Service changed the forms 8863 this year to comply with due diligence requirements imposed by Congress. The changes were noted on the instructions to the form as follows:

Specifically, the changes involved the questions at lines 23-26. Those questions are:

• Has the Hope Scholarship Credit or American opportunity credit been claimed for this student for any 4 prior tax years?
• Was the student enrolled at least half-time for at least one academic period that began in 2012 at an eligible educational institution in a program leading towards a postsecondary degree, certificate, or other recognized postsecondary educational credential?
• Did the student complete the first 4 years of post-secondary education before 2012?
• Was the student convicted, before the end of 2012, of a felony for possession or distribution of a controlled substance?

Almost immediately after the release of the form,for which processing was delayed until mid-February, IRS began seeing a problem. The checkboxes at lines 23-26 were showing on their end as blank for a number of taxpayers.

In response, the IRS issued an alert to tax professionals on February 20, reminding preparers about the check boxes on the revised forms. That alert said, in part:

We have observed instances in which the Form 8863,Education Credits, attached to the Form 1040 and 1040A is not completed correctly. These instances are causing downstream processing delays. We have experienced the following two conditions: (1) The Form 8863 Part III Line 25 Yes or No checkboxes are not completed when required and (2) The Form 8863 Part III Line 26 Yes or No checkboxes are not completed when required.
…

In the interim, we request that software packages be modified to require completion of the correct boxes on lines 25 and 26 when appropriate. Additionally the appropriate checkboxes should be completed for lines 23 and 24. Also please communicate this information to the practitioner community to avoid delays in processing returns.

Some of the incomplete returns appeared to be human error, some of them were prepared by taxpayers using software packages and some of them were prepared at tax preparer offices. What a number of them had in common, however, was that they were related to H&R Block. H&R Block eventually acknowledged as much on its Facebook page:

H&R Block has confirmed with the IRS that there was an issue with certain tax returns filed before February 22, 2013 that included certain education tax credits claimed on Form 8863. We have worked with the IRS to expedite a solution to this issue for all of our affected clients.

If you received this letter of notice requesting additional information for Form 8863 and already responded to the IRS, or have not received a notification to date, there is no additional action needed at this time.

The delays, however, kept coming. And taxpayers who filed even after the February 22 date were running into walls.

On March 8, 2013, the IRS issued a second alert which advised:

To avoid delays, ensure your clients complete Form 8863 correctly.

I reported as much over the weekend and was inundated with emails and comments from taxpayers – many of them angry – who took issue with the fact that the implication was that taxpayer error was completely to blame. That, of course, wasn't true. There was clearly something else going on. IRS, for its part, stuck to its guns. H&R Block remained quite silent, posting occasional updates on its Facebook page but otherwise not offering additional information or an explanation.

Complaints about delays and processing problems, however, weren’t restricted to H&R Block. Taxpayers who filed using TurboTax, TaxWise and other software packages reported delays and errors. Individuals who filed in tax preparer offices were also complaining about delays – including one taxpayer who filed at a VITA (volunteer income tax assistance) site run by volunteers. Tax professionals were alarmed at the number of taxpayers at their offices hoping to file a second return to speed refunds along.

The problem wasn't getting better, it was getting worse.

In some instances, the check boxes appeared to process as blank; in other cases, the check boxes were incorrectly checked “YES” when the taxpayer checked “NO.” Comments on social media complained that returns were being sent to IRS painting them as convicted drug felons, not only delaying refunds but putting other scholarships and educational awards at risk.

It’s been estimated that the errors have impacted over 600,000 tax returns, most of them prepared by H&R Block (or using H&R Block software). I’ve reached out to H&R Block for comment and they intend to issue a statement shortly.

In the meantime, taxpayers are desperate for answers. For now, most are in a “wait and see” pattern and delays of up to six weeks are expected. If you’ve been affected, or think you might be affected, here are a few tips:

• If you are concerned about your return, and you have not received any information that would indicate that there is a problem, contact your tax preparer.
• Don’t file an additional return. This will slow the processing of your return and delay your refund.
• Don’t amend your return if your preparer has indicated to you that the problem is being addressed. Again, this may slow the processing of your refund and cause additional confusion. However, if the problem is not related to a tax preparer or software program (meaning you prepared your own return and did not check the boxes), you may need to file an amended return.
• Remember that the time to process your return begins when it is accepted by IRS, not when you completed your return. The forms 8863 were not accepted until mid-February and not earlier. Sadly, some tax professionals have indicated to taxpayers that returns were being processed earlier (as early as mid-January) and this is not the case.
• If you are waiting for your return to be processed for FAFSA (Free Application for Federal Aid) purposes, you can manually enter your financial info on the website and update that information once the returns are processed.
• For more information about the status of your return, you can use the “Where’s My Refund?” tool.

Taxpayers are understandably angry about the delays. Many depend on refunds related to education credits to pay tuition and other expenses and delays in processing those FAFSAs can be problematic (I was a student once, too). It’s more aggravating since official information about the problem and timing have been limited and rumors are still flying fast and furious. I promise that I’ll pass along more information as it is made available.

Originally published on Forbes.com by Kelly Phillips Erb - 03/09/2013

Security Tax Services LLC

North Sound                                       South Sound

2802 Wetmore Ave, Suite 212           33530 1st Way S, Suite 102

Everett, WA 98201                             Federal Way, WA 98003

425.339.2400                                     253.237.0751

fax 425.259.1099                               fax 253.237.0701

IRS Explains Delays In Processing Some Returns Claiming Education Credits (Forbes)

When the Internal Revenue Service finally announced that it was accepting federal form 8863, Education Credits (American Opportunity and Lifetime Learning Credits (downloads as a pdf), taxpayers heaved a sigh of relief. With a delayed tax season already in play, the additional two weeks pushed filing dates out more than three weeks for up to three million taxpayers.

Most taxpayers assumed, once the returns were filed, that the IRS would begin processing those returns immediately and refunds would be issued in a few weeks. But those few weeks have come and gone and many taxpayers are still without their refunds. Even more confusing, many taxpayers can’t seem to get any indication from IRS that those returns are even being processed.

My inbox and Facebook page has been filled with angry taxpayers wondering what’s happening. The delay for many is much longer than they expected. So what gives?

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.

Check your returns carefully, folks.

(Update: It has been widely reported that a number of the problems associated with the forms 8863 are related to a problem with H&R Block. H&R hasn’t issued a statement on its site though they have posted the following on their Facebook page as they relate to forms filed before February 22:

H&R Block has confirmed with the IRS that there was an issue with certain tax returns filed before February 22, 2013 that included certain education tax credits claimed on Form 8863. We have worked with the IRS to expedite a solution to this issue for all of our affected clients.

If you received this letter of notice requesting additional information for Form 8863 and already responded to the IRS, or have not received a notification to date, there is no additional action needed at this time.

For those clients who have received notification from the IRS and have yet to respond, please call your local H&R Block office. The office or customer service agent will be able to better serve you and provide next steps.

For those clients who received the IRS notice regarding form 8863 that said it would take 6-8 week to receive a refund after this issue was resolved, we are assured it will not take that long. We continue to work with the IRS and as we have more specifics on timing and any other updated information, we will share it with our clients.

H&R Block appreciates that this issue may cause problems for our clients. We will continue to update clients as more information becomes available. We thank clients for their patience while we work with the IRS to expedite the filing process on their behalf.

It is worth noting that delays on the 8863 are not restricted to H&R Block customers and extend to returns filed after the 2/22 indicated in H&R’s statement. Some users are reporting similar problems with TurboTax returns (you can read complaints in various forums) and tax professionals are reporting that they are seeing errors, as well.

Additionally, the due diligence requirements are slowing processing due to concerns about fraud. Drake Tax Software has an interesting take on funding and fraud – definitely worth a peek.

With respect to tax professionals, I’m getting reports from many tax pros that taxpayers are attempting to resubmit “original” returns with the forms 8863 after filing in order to speed up refunds. This will not speed up your refund.Filing a duplicate return will do just the opposite and slow the processing of your return. The tax software program or tax professional who processed your original return ought to be able to offer you some guidance on how to proceed (in most cases, it’s a wait and see). If, however, there were clear mistakes on your return (as was noted in the comments where some boxes are checked incorrectly by a preparer or software package), you may need to file an amended return.)

Originally published on Forbes.com by Kelly Phillips Erb - 03/09/2013

Security Tax Services LLC

North Sound                                       South Sound

2802 Wetmore Ave, Suite 212           33530 1st Way S, Suite 102

Everett, WA 98201                             Federal Way, WA 98003

425.339.2400                                     253.237.0751

fax 425.259.1099                               fax 253.237.0701