With just a few days left before tax season officially opens on January 30, the Internal Revenue Service has announced that there will be a slight delay in processing individual tax returns claiming education credits. Those returns will begin to be processed by the middle of February.
Specifically, those taxpayers who are affected are those who will file federal form 8863, Education Credits (downloads as a pdf). Those taxpayers can begin filing their tax returns after the IRS updates its processing systems (again, mid-February). That applies to those claiming the American Opportunity Tax Credit and the Lifetime Learning Credit. The IRS estimates that this will affect about three million taxpayers.
The American Opportunity Tax Credit and the Lifetime Learning Credit were affected by the recent tax deal. In particular, the American Opportunity Tax Credit or the “supercharged” Hope Scholarship Credit, which offers a credit of us to $2,500 has been extended through extended through 2017. Income phaseouts – meaning the points at which the credits begin to diminish – were altered for both the American Opportunity Tax Credit and the Lifetime Learning Credit (likely causing most of the delay).
If you’re taking advantage of other education-related tax breaks, including the tuition and fees deduction and the student loan interest deduction, the delay does not apply to you. Those above-the-line deductions are available to taxpayers who plan to file when tax season opens. This also includes taxpayers who plan to file a federal form 8917,Tuition and Fees Deduction (downloads as a pdf).
I’ll keep you posted as IRS continues to work out the bugs. Not long now!
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IRS: If claiming education tax credit, wait until mid-February
ISAAC M. O'BANNON, EDITOR - CPA PRACTICE ADVISOR
CREATED: JANUARY 29, 2013
Filing starts today, Jan. 30, 2013, but many taxpayers will have to wait a few weeks longer.
Filing starts today, Jan. 30, 2013, but many taxpayers and tax professionals will have to wait a few weeks longer.
The Internal Revenue Service has announced that processing of tax returns claiming education credits will begin by the middle of February.
Taxpayers using Form 8863, Education Credits, can begin filing their tax returns after the IRS updates its processing systems. Form 8863 is used to claim two higher education credits -- the American Opportunity Tax Credit and the Lifetime Learning Credit.
The IRS emphasized that the delayed start will have no impact on taxpayers claiming other education-related tax benefits, such as the tuition and fees deduction and the student loan interest deduction. People otherwise able to file and claiming these benefits can start filing Jan. 30.
As it does every year, the IRS reviews and tests its systems in advance of the opening of the tax season to protect taxpayers from processing errors and refund delays. The IRS discovered during testing that programming modifications are needed to accurately process Forms 8863. Filers who are otherwise able to file but use the Form 8863 will be able to file by mid-February. No action needs to be taken by the taxpayer or their tax professional. Typically through the mid-February period, about 3 million tax returns include Form 8863, less than a quarter of those filed during the year.
The IRS remains on track to open the tax season today for most taxpayers. The filing season opening includes people claiming the student loan interest deduction on the Form 1040 series or the higher education tuition or fees on Form 8917, Tuition and Fees Deduction. Forms that will be able to be filed later are listed on IRS.gov
These are to let you know they have problems with there system and did not tell us their desions until late February.