On December 17th 2010 Congress and the Obama administration pushed through their 2 year temporary tax cut package that mean we will keep the same Bush tax rates for at least the next 2 years, in addition to passing a 2011 payroll tax holiday, extending $1000 child tax credit and the estate tax.
While I'm happy that the tax rates were extended so I won't have to pay more in taxes next year, there is a problem with when the tax package was passed. because of how late in the year the bill was passed, people who itemize will experience tax filing delays.
Delay Filing Taxes If You Itemize
The IRS has put out a statement saying that the estimated 50 million+ taxpayers who itemize their deductions when filing will not be able to e-file or send in their paper tax forms taxes until the agency has been able to make all the necessary changes to the IRS software systems. From the IRS:
The Internal Revenue Service plans a Feb. 14 start date for processing tax returns delayed by last month’s tax law changes. The IRS reminded taxpayers affected by the delay they can begin preparing their tax returns immediately because many software providers are ready now to accept these returns. Beginning Feb. 14, the IRS will start processing both paper and e-filed returns claiming itemized deductions on Schedule A, the higher education tuition and fees deduction on Form 8917 and the educator expenses deduction. Based on filings last year, about nine million tax returns claimed any of these deductions on returns received by the IRS before Feb. 14.
So those of us who itemize on our taxes, the IRS won't start processing our returns until February 14th.
While having an estimated 50 million taxpayers who itemize their taxes not being able to file til February sounds bad, only about 9 million of those usually file in January in February most years anyway.
Does The Tax Filing Delay Affect Everyone Or Just Some?
If you itemize on your taxes, you will be affected. If you don't, you're good to go.
The delay affects both paper and electronic filers who itemize deductions on Form 1040 Schedule A. That includes those claiming the new Educator Expense Deduction, which credits grade school teachers for out-of-pocket expenses of up to $250.
It also includes those claiming deductions for college students, covering up to $4,000 of tuition, which is claimed on Form 8917, though the IRS said there will be no delays for those that claim other education tax credits.
If you file a form 1040 Schedule A, you’ll be affected. I guess that includes me, although to be honest I usually end up waiting til the last minute anyway.
Most Software Allow You To Complete Your Return Now
While you can't file your return until February 14th, if you're using one of the many tax software out there, you can probably already complete your tax return as of today. While those companies, like TurboTax, ESmart Tax and H & R Block at Home, won't file your return until the 14th of February, you can enter your return at any time. They've already updated their software to account for the new law. Apparently they can move at a faster pace than the government. From USAToday:
At TurboTax, for example, customers' returns will be placed in a queue until the IRS starts accepting them. Customers will receive a notice when their returns are e-filed, as well as an estimated date for their refund, says TurboTax Vice President Bob Meighan. H&R Block, CompleteTax and TaxACT will also hold on to customers' returns until the IRS starts accepting them.
Another advantage to this strategy is that you may not have to wait to get your state tax refund. TurboTax, TaxACT and CompleteTax say they'll e-file state tax returns before Feb. 14 when possible. H&R Block is holding tax software customers' federal and state tax returns until Feb. 14, according to spokesman Brian Spano.
So the tax software companies will hold onto your return and only submit them once they're able to. Makes it easy for you!
Also, another perk of doing it this way is if you're due a refund from your state, some states may allow filing earlier than February 14th. If your state is one of them, then you may get your state tax refund before your federal one.
TurboTax is the software I used last year to file my taxes, and I highly recommend it because of it's ease of use, and comprehensive approach. It has several different packages to choose from – I chose TurboTax Deluxe as it works nicely for my small business scenario – and Schedule C income. Check out all of your filing options at their site.
Also, find out if you're eligible to file your taxes for free this year through the link below!
Other Important Tax Considerations This Year
- Checklist Of Things You’ll Need At Tax Time In 2011 For Doing Your 2010 Taxes
- Tips For Self-Preparing And Filing Your Income Taxes
- How To Check The Status Of Your Federal And State Income Tax Return
- 2011 Federal Income Tax Brackets: IRS Marginal Tax Rate Changes To Be Aware Of
Will you be affected by the filing delay this year, or do you normally file later than February 14th anyway? Does it depend on if you're getting a refund or if you owe?