Claiming some tax credits could delay refund

Published 12:00 am Tuesday, January 29, 2008

FRANKLIN—Nearly three out of four taxpayers are unaware that they face delays in their tax refund when they claim certain credits, according to a survey conducted by H&R Block.

The IRS announced in December that federal returns claiming credits for child and dependent care, education, residential energy, mortgage interest, or first-time homebuyers in the District of Columbia would not be accepted for processing until Feb. 11.

Taxes can be filed before then and amendments made after that Feb. 11 deadline, according to Linda Dilday, office leader and top tax pro with the H&R Block Franklin office.

Other experts are recommending taxpayers file with either a licensed preparer or to e-file with approved software products.

Two such credits — education credits and child and dependent care credits — “are two of the more common of the tax credits,” Dilday said.

“That’s why it’s important for people to check the changes, whether they affect the taxpayer,” Dilday said.

The day before adjourning for winter break last year, Congress passed a one-year fix — averting higher taxes for the majority of middle-income America facing the Alternative Minimum Tax (AMT). The Senate version of the bill, which does not compensate for a $50 billion loss of tax revenue, won majority favor and was signed into law by President Bush. The passage of this legislation boosts the AMT exemption and extends a number of credits for 2007.

In 2006, approximately four million households were required to pay the AMT. Without ratification of another provisional one-year “patch” to boost the amount of the AMT exemption, an additional 20 million households would have to pay an estimated average of $2,000 more in federal taxes for 2007. Another 27 million filers, who claim a variety of credits closely connected to the AMT (i.e. child and dependent care, education, residential energy and state/local taxes), were also in danger of feeling the AMT pinch.

“While the AMT legislation benefited millions of taxpayers, it has increased tax filing complexity,” said Al Faison, district manager, at H&R Block, “Taxpayers need to understand if and how the legislation and IRS processing changes affect them. Without knowing what steps to take, taxpayers could miss important tax benefits or experience an unnecessary refund delay.

“The most important advice for taxpayers this year,” Faison said, “is to choose a tax preparer who stands behind his work or a do-it-yourself tax solution that’s reputable, not just at tax time but all year long.”

H&R Block officials also offer these tips:

n Don’t wait to complete your return - Taxpayers should have their returns prepared as soon as their W-2s arrive so they will be among the first in line when the IRS is ready to accept and process their return.

n Use the correct forms - Because a number of tax forms must be updated as a result of the AMT legislation, taxpayers who prepare their own returns will want to make sure they’re using the most current forms available. The latest forms will be available at H&R Block offices, on H&R Block’s digital products - TaxCut online and software - as well as on the IRS Web site.


Use e-file and direct deposit - Regardless of whether a taxpayer is affected by the potential delays, e-filing is the fastest way to send a tax return to the IRS. And when combined with direct deposit, taxpayers will receive their refunds in 8 to 15 days, instead of the 6 to 8 weeks needed with paper returns and mailed IRS checks.