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After legislation delays, tax season starts Monday

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JAMES P. LEUTE
February 12, 2011
— For millions of U.S. taxpayers, the filing season opens Monday when the Internal Revenue Service will start accepting and processing returns delayed by changes to tax laws.

In mid-December, Congress enacted the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 that extended a number of expiring provisions.


In order to accommodate the changes, the IRS needed extra time to update its computer systems.


“It’s not the IRS’ fault,” said Barb Bartlett, a co-owner of Liberty Tax Service in Janesville and Beloit. “Congress passed these changes so late in the year, and I’m not sure they realized that it would require significant changes in the IRS’ software.”


The delays primarily affected those taxpayers who itemize deductions on Form 1040 Schedule A. It also delayed those filers who claim higher education tuition and fee deductions and educator expense deductions.


Originally, the IRS said those filers would need to wait until the end of February to file their returns. That date, however, was moved up to Monday.


Bruce Hamilton of Hamilton CPA in Janesville said about two-thirds of his clients itemize deductions.


“At this stage, I have at least 12 returns done and waiting to go,” Hamilton said last week. “I can’t transmit them, or they’ll come back as rejected. If people were to mail in hard copies, the IRS has said that it will put the return in a corner, which basically means it will be lost forever.”


The IRS expects to receive more than 140 million individual tax returns this year, with most of those being filed by the annual April deadline. This year, taxpayers have until Monday, April 18 to file their 2010 tax returns because Emancipation Day—a holiday observed in the District of Columbia—falls on Friday, April 15.


The delay in filing likely will create more problems for tax preparers than filers.


Bartlett and Hamilton said many people who itemize their deductions are still waiting to receive their final tax documents in the mail, so the delay won’t affect them at all.


“What it really does is create a time crunch for CPA community because it shortens the amount of time to get a lot of returns processed,” Hamilton said, noting that he’s seen a handful of similar delays in his 22 years in the business. “Unfortunately, the IRS will never make an adjustment on the deadline due to inaction by Congress.”


Hamilton said the delay affects many Wisconsin taxpayers.


“A lot of people here itemize because they have a good job, make a good living, have a mortgage and pay property taxes,” he said. “Because Wisconsin is a high income tax, high property tax state, it makes it easy for people to itemize.”


Bartlett said that her offices also have been sitting on completed forms, waiting for the IRS OK to file.


“We have two crazy periods,” she said. “The first are the early filers, those people whose returns basically involve simple W-2s, who just want their refund as soon as possible. We see them from about the third week of January through the end of February.


“Then things slow for a reasonable period into March, when things pick up with the more traditional filers, those who itemize and have been delayed this year.”


Bartlett said it’s important that taxpayers contact their preparers as soon as possible to get the process started.


“Even if you have to pay, you can still file early, as long as you pay by April 18,” she said. “It’s better to get it done as early as possible so you know exactly where you are and maybe what you can do to lessen your tax liability.”



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