The Internal Revenue Service has announced that some taxpayers will not be able to file their returns until mid to late February 2011 due to last year's tax changes. The IRS will need to reprogram its processing systems for three provisions that were extended in the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 that became law on December 17, 2010.
Who is affected?
People claiming any of the following three items involving the state and local sales tax deduction, higher education tuition and fees deduction and educator expenses deduction, as well as those taxpayers who itemize deductions on Form 1040 Schedule A, will need to wait to file their tax returns until tax processing systems are ready.
- Taxpayers claiming itemized deductions on Schedule A—Itemized deductions include mortgage interest, charitable deductions, medical and dental expenses, as well as state and local taxes. In addition, itemized deductions include the state and local general sales tax deduction extended in the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010.
- Taxpayers claiming the Higher Education Tuition and Fees Deduction—This deduction for parents and students covering up to $4,000 of tuition and fees paid to a post-secondary institution is claimed on Form 8917. However, the IRS emphasized that there will be no delays for millions of parents and students who claim other education credits, including the American Opportunity Tax Credit and Lifetime Learning Credit.
- Taxpayers claiming the Educator Expense Deduction—This deduction is for kindergarten through grade 12 educators with out-of-pocket classroom expenses of up to $250. The educator expense deduction is claimed on Form 1040, Line 23 and Form 1040A, Line 16.
For those falling into any of these three categories, the delay affects both paper filers and electronic filers.
ACTION ITEM: Taxpayers should still fill out their tax organizers and submit it to their CPA as early as possible. Once the forms are approved by the IRS, the returns can then be processed.
Thomas F. Scanlon, CPA, CFP®