- Days left

Late Tax Law Changes Affect Workers Seeking Child Care, Education Credits

filed under: Taxes, Tax Credit
NEW YORK (AP) - Americans who claim tax credits for child care expenses, college costs or home energy updates may have to wait a while for their refund checks from the IRS this year.
That's because Congress didn't get a major tax bill passed until December, giving the Internal Revenue Service too little time to fix the forms consumers need to file with their income tax returns for five major tax credits.
Some taxpayers may be able to work around the problem, tax experts say, but many won't.
"It's a big issue," said Timothy C. Gokey, president of retail tax services at H&R Block in Kansas City, Mo. "A lot of people, especially early filers, don't know about it - or don't know how it will affect them."
It's the second year in a row that tax legislation got put off until so late in the year that IRS forms couldn't be prepared on time. The result, according to Nina E. Olson, national taxpayer advocate, is that many taxpayers miss out on money they're due.
Olson said in a report to Congress last week that late-year changes in the tax code are "the most serious problem facing taxpayers."
She estimated that in 2006, more than a million taxpayers may not have claimed deductions they were entitled to "simply because they did not know about them." Low-income families, she added, "may experience financial hardship because their refunds are delayed."
This year's problem with tax credits is a fallout from congressional repair of the alternative minimum tax. The AMT is a parallel tax that eliminates many deductions and credits most taxpayers claim, thus increasing the tax liability of wealthy families who might otherwise pay less.
The AMT "patch" approved by Congress raised the AMT exemption so that millions more middle-income families wouldn't be drawn into AMT. While many forms were quickly updated to conform to the AMT changes, the forms for some credits got hung up.
The IRS said it won't be able to process returns involving any of the five credits until Feb. 11 and that as many as 13.5 million taxpayers face the possibility of delayed refunds.
The five forms affected by the delay are:
Form 8863, Education Credits (Hope and Lifetime Learning Credits).
Form 5695, Residential Energy Credits.
Form 1040A's Schedule 2, Child and Dependent Care Expenses for Form 1040A Filers.
Form 8396, Mortgage Interest Credit.
Form 8859, District of Columbia First-Time Homebuyer Credit.
Taxpayers can, of course, wait until Feb. 11 to file. But experts offer some alternatives for those who want to file claims earlier.
H&R Block's Gokey estimated that about 4 million of the 13.5 million affected taxpayers file early, and that about half claim a credit for child and dependent care expenses.
The "workaround" for this group, which normally would file the simplified 1040A form, is to file the more complex 1040 tax form along with Form 2441, Child and Dependent Care Expenses.
Mark Steber, vice president for tax resources at Jackson Hewitt Tax Service Inc., said taxpayers also may be able to file at any time without claiming the credits, and then file an amended form later including the credits.
"The hassle is that amended forms have to be paper-filed, and that can slow the refund even more," Steber said. Taxpayers who file their returns electronically and request an electronic deposit of refunds can get their money within 10 days; taxpayers using paper often wait six to eight weeks for their refund, Steber said.
Still, he suggested that taxpayers consult their tax preparers.
"If you're concerned, go in and ask early what your options are," he said. "I worry it could be like last year. How many said, 'The heck with it!' and didn't get the money they deserved?"
Mark Luscombe, principal tax analyst at CCH Inc. of Riverwoods, Ill., said that it's not unusual that tax forms contain new items or special items that get overlooked. The company is a division of Wolters Kluwer, which provides tax information and services to tax professionals.
Last year, for example, federal tax forms included a telephone excise tax refund, "and a lot of people missed it," said Luscombe.
But, he added: "It's been quite a while since we had legislation so late in the year that tax forms had to be amended."
Luscombe suggested that before taxpayers take extraordinary measures to claim credits early, "they should check on the cost" of amending their filings.
Luscombe also warned that similar problems could occur again next year if Congress delays acting.
"Remember, this was a one-year AMT patch, so they'll have to go at it again next year," he said.
On the Net:
http://www.irs.gov
http://www.hrblock.com
http://www.jacksonhewitt.com
2008-07-21 15:51:23

Increase your money and finance knowledge from home

Building Credit from Scratch

Start building credit...now.

View Course »

Basics Of The Stock Market

Stock Market 101 - everything you need to know but were afraid to ask!

View Course »

TurboTax Articles

11 Fun Ways to Spend Your Tax Refund

There are plenty of practical ways to spend your tax refund ? such as saving for major expenses, banking it as the start of an emergency fund or paying down debt. But it?s hard to resist the allure of spending some or all of your refund on something a little more fun. If that?s the road you want to go down, here are some ways suggestions.

A Tax Filing Factsheet for eBay Sellers

You can find almost anything for sale on eBay, from a piece of fine art to clippings of Justin Bieber?s hair. So it's no surprise that the IRS doesn't view all sellers alike in the online marketplace. You may not have to pay tax at all if you are essentially hosting an online garage sale, but if you run your eBay account more like a business, you should be reporting your sales to the IRS.

Tax Tips for Handymen and Odd Jobs

If you work as a handyman or do odd jobs around town for money, you are operating a business in the eyes of the IRS. Since you own your own business, you're likely a self-employed sole proprietor. This means you'll have lots of potential tax deductions to investigate.

Identity Theft: 7 Steps to Reclaiming Your Identity and Keeping it Safe

As more personal information continues to be stored online, the risk of identity theft also increases. In 2014 alone, the Bureau of Justice reported that 17.6 million U.S. residents experienced identity theft. If someone uses your personal data pretending to be you, it's a serious crime. With quick, decisive action, you can help discover the fraud, stop further damage and reclaim your identity. Here are six steps to get you on your way.