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

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