The Internal Revenue Service has found that changes in Form 8863, Education Credits, are delaying more than 600,000 tax returns, many of which appear to come from H&R Block.
The IRS acknowledged in an email Friday that it revised the form for tax year 2012 “to help taxpayers and tax preparers understand the qualifications for the American Opportunity Tax Credit. Checkboxes for lines 23-26 were added to confirm basic qualifications for taxpayers claiming this credit. If these lines are left blank, there will be a delay in the processing of the taxpayer’s return. To avoid delays, ensure your clients complete Form 8863 correctly.”
The IRS originally warned about the delays last month, telling preparers that they needed to fill out Yes or No in response to certain questions asking whether students had completed four years of post-secondary education before 2012 and whether they had ever been convicted before the end of 2012 of a federal or state felony for possession or distribution of a controlled substance (see IRS Warns of Problems with Education Credit Filings).
However, it turns out the IRS had actually made further changes in the programming of the forms so that an N needed to be filled out instead of a No. The form itself, though, has checkboxes next to the words Yes and No. All this confusion has led to many frustrating refund delays for taxpayers, particularly at the nation’s largest tax prep chain, H&R Block.
On Sunday, Block posted a message on its Facebook page saying it was working to resolve the issues with the IRS after being inundated with complaints from customers.
“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,” the company wrote. “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 or 800-HRBLOCK. 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 weeks 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.”
An IRS spokesperson told MarketWatch on Tuesday that the problem was delaying the processing of about 10 percent of the approximately 6.6 million tax returns filed with the Form 8863. Block has apparently been the major recipient of thousands of complaints on Facebook and Twitter about the problem. The IRS is able to process the tax returns now that it knows the source of the errors, but because that means there are extra steps involved, taxpayers will still be subject to delays. One recent comment on Block’s Facebook page from a customer indicated they have been waiting a month and a half for their tax refund.
Block updated the Facebook page Tuesday to say that it was going to reach out individually to the taxpayers who were affected, referring obliquely to articles like the one on MarketWatch as well as other outlets like USA Today and Forbes about the problem. “Sorry for the late update but we've always assured you we would share information as soon as it becomes available,” said Block. “There continues to be a lot of information floating around regarding the Form 8863 issue that is impacting a number of our clients. We wanted to give you a place to go to get those facts and the next steps for those in this situation. In addition to this page on our website, linked below, we are reaching out to each and every one of you individually to give you direction and give you the facts. Please look for those emails, calls or letters starting tomorrow. Again, we apologize for the inconvenience this has caused and we’re glad to hear some clients are already seeing their refund status change due to the work with the IRS. Please keep checking here and on the website for the latest information.”
On the new page about the situation on its site, Block stated, “The IRS has informed us and other impacted providers that they are currently processing these returns. This review process means the IRS may need 4-6 weeks from this date to issue a refund. H&R Block clients are already reporting a change in their refund status since the IRS began processing these returns.”
Block added that the IRS is reminding taxpayers to check the “Where’s My Refund?” tool on IRS.gov to learn the status of their tax refund, but since the site is updated overnight by the IRS, taxpayers do not need to check it more than once a day. Early in tax season, the IRS asked taxpayers not to check “Where’s My Refund?” too often because it was getting bogged down with requests from anxious taxpayers (see IRS Asks Preparers and Taxpayers to Limit Use of ‘Where’s My Refund’ Tool).
“The IRS has stopped sending letters based on this Form 8863 issue to this group of affected H&R Block clients,” Block noted.
The glitch is also causing problems for taxpayers who are applying for financial aid through the Free Application for Federal Student Aid program. Block advised that there are manual steps they can take that will allow their FAFSA application to proceed while their return is still processing.
The Department of Education suggests that if the tax return has not yet been processed by the IRS, they can manually enter the tax return data on the application. They can then return to the online FAFSA to update the information when the return has been processed. The information about this is posted on the FAFSA section of the Department of Education's website.
Block offered a statement of regret to its clients, saying, “H&R Block appreciates that this issue may cause problems for our clients and we are doing everything in our power to address the processing of these returns. We will continue to update clients as more information becomes available. We thank our clients for their patience while we continue to work with the IRS to expedite the filing process on their behalf.”
The delays in tax refunds this year after the last-minute fiscal cliff deal are also starting to have an impact on the economy at large. Walmart CFO Charles Holley told an investor conference Tuesday that the big box retailer has cashed $2.7 billion worth of tax refund checks this year so far in the U.S., compared to approximately $4 billion at this time last year, according to Reuters.
What with all the confusion this tax season, including the late start to the season and delays in forms including the one for education tax credits, the last thing that taxpayers and preparers needed was a major software bug caused by a difference of one letter in the alphabet. To paraphrase an old saying, sometimes N really does mean No.
18 Comments
I must agree H & R Block is one of the biggest companies and is at fault, but so is the IRS. Their not only holding up the 8863 filers, but they aren't even acknowledging the new ones I am submitting. What's wrong with this picture?? For H & R it's all about gouging the people with their ridiculous prices too!! But that's more business my way that they are losing. Such a shame..Shame on them ( H & R Block)They should be taking the RTRP test.
Posted by: kawerner | March 14, 2013 9:08 PM
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I also worked for Block for years. They will never admit that it was there fault. Even I as a little person subscribe to the IRS emails, and they sent emails as what needed to be done. Our small company uses Drake and as was said they update it all the time to keep up with the IRS changes. Luckily this mess didn't happen to any of our clients.
Posted by: Char | March 14, 2013 2:10 PM
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I have been preparing personal, corporations, and payroll tax returns for the last 29 years. I am a Register Tax Return Preparer (RTRP), and if anybody that has gone to H & R Block and is not satisfied with their tax return this year please email me at pamr1@optonline.net and I will prepare your taxes the correct way. Thank you Pam. This is why I believe that all tax preparers take the RTRP test. If a preparer knows taxes they should have picked this up when reviewing the tax return they prepared.
Posted by: Pam RTRP | March 14, 2013 2:09 PM
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Now that RALs (Rapid Refunds) are gone, I think that there is a huge opportunity for the year-round tax accounting type firms to tap into the lower to lower-middle income market that H&R Block and other retail tax prep firms service. If you provide better, more personalized service at a slightly lower price, then these retail firms have no advantage anymore.
Posted by: jthor911 | March 14, 2013 12:21 PM
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It appears that many have already forgotten that the IRS has stated they didn't have proper business rules in place from the beginning for that form and as we would all like to cheerlead for our software vendors or our firms and it would be nice to blame H&R for all the problems, in reality many preparers didn't answer the questions properly and didn't understand what I feel are poorly worded questions. Who worded the questions? The IRS. And for those preparers who think that they weren't affected, remember not all clients have received letters yet and not all clients will as it was reported that the IRS is trying to come up with something to fix the problem without sending out so many letters. Only time will tell if clients got affected or not. The funny thing is that I have had reported that tax preparers are having clients that have been getting letters from the IRS on the EIC telling tax payers they should have claimed it, yet the preparer gets a $500 fine for not doing due diligence and these clients hadn't even lived in the US for 6 months so why would they have claimed it. Try explaining that to a client that thinks a preparer screwed up and should have got them an extra $5,000. Maybe, just maybe, we should all try to be a little patient and laugh at this strange year for tax preparation instead of trying to find a scape goat for everything.
Posted by: valeriecobb | March 14, 2013 12:05 PM
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I have amended more H&R tax returns than those prepared by any other firm. This could be more a case of volume and margin in error, rather than incompetence. If you look around at the "Data Entry" Tax Shops in July, they are all dark--because they are closed. A great tax accounting firm is open all year--with real accountants who actually have degrees and know tax law. People need to know who they are hiring because the cost of preparing their taxes by either of these firms is almost the same, but the difference in result is miles apart. We use Drake Software--it updates 1-6 times a day with tax law changes and real time resolutions. We don't have to deal with any of these issues because Great Software and Great Accountants produce optimal results. Ironically, we charge less than H&R--but we can do a 1040 with a pen.
Posted by: Suzanna | March 14, 2013 10:32 AM
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It is funny that H & R Block is being blamed yet when the clients of H & R Block look at their copies of their return all the boxes ARE checked on the 8863, hmmm guess the preparers DID do their job, must be a glitch in the computer systems, and if turbo tax and jackson hewitt have issues with the same form than I would have to say the "GLITCH" is on the IRS's side right? I think the one who said because H & R Block does the most returns it would seem this probem would hit them the worse. Gesh it is just common sense people.
Posted by: Sporter | March 14, 2013 8:56 AM
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I am a tax preparer 3 doors down from H & R Block. People leave there pulling their hair out and come to us for a better price and a calm confident environment. I took their course in 2002 after 25 years in private accounting as a controller. It taught me the basics. That was it. All else was self learned. I correct h & r block returns on average of 25 per year. It is good money. But this is not their fault. My software tells me those entries are incorrect. None of my returns have been delayed this year. We have done over 350 already. Use ultra tax. Call Marianne fisher at 800-968-9600 xt 4118
Posted by: Dianeharbour | March 13, 2013 9:31 PM
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For what it's worth, we use TaxSlayer Pro in our office, and we have not had a single return containing the 8863 held up. They got it right the first time - GO TAXSLAYER!!
Posted by: olivertax | March 13, 2013 4:16 PM
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In all fairness, it isn't always the preparer who causes the problem. Our software does not allow direct input onto most of the forms. We have to go into a bunch of stupid worksheets and fill them out and then those figures are carried to the actual form. My office got caught up in the earlier snafu about the boxes not checked on the 8867 so therefore our first couple of batches got held up in February. If we could just go into the actual forms and fill them out, a lot of problems would be eliminated. And if the IRS doesn't tell the software developers that certain new boxes need to be checked, then it might not check them after you fill in the worksheet. I want a software that allows me to use the actual line on the actual form so that I can fill in whatever needs to be there without jumping to a worksheet and depending on that worksheet to do the right thing. Does anyone out there know of a software that does that? If so, I'm all ears!
Posted by: anitamartinez | March 13, 2013 1:05 PM
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Given as stated above, "However, it turns out the IRS had actually made further changes in the programming of the forms so that an N needed to be filled out instead of a No." I fail to see how any software provider is at fault in any way.
Posted by: QualityCounts | March 13, 2013 12:23 PM
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I filed my 8863 form at H&R Block on 2/4/2013 it cost me over $200.00 for the 30 mins I spent there. The IRS sent an acknowledgement that they rec'd my forms on 2/16/2013. The IRS site stated that it was in rec'd status for several weeks and then at least a week ago it went from that screen to a different screen stating they are processing and has remained with no change. H&R Block has just sent me the first email regarding situation yesterday on 03/12/2013. I currently finding it hard to stomach the obsorbant charges to process my forms. - alc
Posted by: alc7474 | March 13, 2013 12:10 PM
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The reason Block is called out is because Block does more returns than anyone else the second one called out was Turbo Tax.In my office we have not had this problem but it took a while to find out what the problem was with so much going on with all of the IRS delays and forms not being available. In my office I teach the basic which means that a new tax preparer cannot do a complex return they can only do a simple return. New preparers the first year only do very easy returns and depending on how they do will determined how more advanced the returns they will do in the future. I cannot speak for all of Block but I can for my office. I fix returns all year, that were completed by CPA's and EA's. Yes everyone can makes a mistake but some of these people should not be doing taxes.
Posted by: worldofjones | March 13, 2013 10:12 AM
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The truth is that the IRS changed the way they electronically process yes/no questions on the 8863 and did not communicate this with many of the tax software developers. The forms are being prepared correctly by the preparer.
H&R Block is not the only tax business having a problem. Many different tax businesses using many different tax softwares are having the same problem.
Even TaxWise (the tax software that IRS VITA preparers use) is having this issue.
Posted by: jthor911 | March 13, 2013 10:03 AM
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Get real, the culprit in all this is the computer programmer who failed to understand what the electronic transmission required when the preparer checked the "No" block.
Posted by: shortgrass | March 13, 2013 10:03 AM
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This is one reason why the IRS was attempting to institute control over the Paid Tax Preparer Industry.
Celia Broadus, CPA
Posted by: celia b | March 13, 2013 9:33 AM
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Filed at home w/hr block on 1/18/13 it was accepted 2/4 then tool tracker indicated return was recieved, after about 3 weeks irs tool tracker disappeared.As of 3/13/13 No date has been given and IRS seems not to want to get on the phone with us.
Posted by: momdadof4 | March 13, 2013 9:23 AM
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I think this is ironic the H&R Block is one of the biggest companies at fault for this. If they truly started training they're staff how to do the forms correctly and to actually talk to the clients and not do all of the rah,rah,rah maybe that wouldn't be the ones singled out in this. They need to stop hiring people that cannot prepare a tax return period. Yes we all make mistakes, but I use to be an employee many years ago and from personal experience I know how they teach there new students and who they hire. I also have seen over the years tax returns that are filed completely wrong by H&R Block tax preparers. Maybe the need more training and less rah rah!
Posted by: cor038 | March 13, 2013 8:07 AM
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