Most people would rather muck out a horse barn than do their taxes. But every year, millions of taxpayers hunker down and file their tax returns as soon as they receive their W-2s. The main reason: They're expecting a big refund, and they want their money.
This year, though, some of those early filers will have to wait a little longer for their refunds. Shortly before the holidays, Congress approved a stopgap measure that will prevent the alternative minimum tax from spreading to more than 20 million taxpayers this year. The fix came so late in the year that the IRS didn't have time to update all its tax forms to accommodate the change before this year's filing season.
Most taxpayers won't be affected by the delay. But if you plan to use one of the five affected tax forms to claim a tax credit, you'll have to wait until Feb. 11 to file electronically. You can mail in a paper return before that date, but there's no advantage to doing that, because the IRS won't process your return until Feb. 11. Some of the tax credits are fairly obscure, but parents who claim a popular tax credit to offset the cost of child care could be affected. The delay will also affect families that claim the Hope and Lifetime Learning credits to reduce the cost of college tuition (see box for list of credits and forms).
The IRS estimates that 13.5 million taxpayers use the forms that are affected by the delay. But based on past filing patterns, only between 3 million and 4 million taxpayers will likely be affected, the IRS says.
If you're eager to get your refund, those statistics probably won't make you feel better. But there are steps you can take to shorten the wait:
•File electronically. Taxpayers who e-file their returns and arrange for direct deposit of their refunds can get their money in as little as 10 days, the IRS says. If you have to wait until Feb. 11 to file, you can still get your refund by the end of February. Paper-filed returns take about four to six weeks to process, which means your daffodils could be blooming by the time you get your money.
If you try to e-file a tax return containing one of the five credits before Feb. 11, the IRS will reject it, IRS spokesman Terry Lemons says. But that doesn't mean you have to wait until Feb. 10 to do your taxes. Major tax software providers, such as H&R Block and TurboTax, will allow customers to prepare and submit their returns ahead of time. Once the IRS starts accepting the returns, the software companies will
Taxpayers with adjusted gross income of $54,000 or less can e-file their returns for free through the IRS Free File program. Free File will be available starting Jan. 11. This year, more than a dozen software providers are participating in the program. To take advantage of Free File, you must connect to a software provider through the IRS website, www.irs.gov.
If you're determined to file on paper and you're eligible for one of the five credits, you'll need to get updated forms. The 2007 tax packages were mailed in December, before Congress approved the AMT fix, so the IRS didn't include the five forms. You can download the forms at www.irs.gov, or call the IRS at 800-829-3676 and request them.
•Use a different form to claim the child- and dependent-care credit. The AMT-related changes affect this credit only when it's claimed on Form 1040A, says Julie Miller, spokeswoman for TurboTax. If this is the only one of the five credits you plan to claim, you can avoid the wait by filing the longer Form 1040, she says. TurboTax, along with most other tax software programs, will automatically reroute users who claim the credit to Form 1040.
•File an amended return. If you're desperate for your refund, here's a strategy to consider: File your return before Feb. 11, without claiming any of the affected credits. Once you've received your refund, file an amended return claiming the credits and get the rest of your money.
But Tim Gokey, president of H&R Block retail tax services, says he doesn't recommend this approach, because you'll end up waiting a long time for the second part of your refund. That's because you'll have to wait until your first return is processed to file your amended return. In addition, you can't e-file an amended return. That means you'll have to mail it in and wait for the IRS to send you a check.
The IRS is also concerned that taxpayers who adopt this strategy will forget to file an amended return, or "decide it's not worth the paperwork," Lemons says. "This is money people are entitled to," he adds. "We don't want that to happen."
If waiting longer for your refund has you spitting mad, here's a radical idea: Stop giving Uncle Sam an interest-free loan, which is what your refund represents. This is the second year in a row that some taxpayers have faced refund delays because Congress enacted late changes to the tax code. You can simply adjust your withholding so that less money is withheld from your paycheck. There are several withholding calculators on the Internet. The IRS offers one at www.irs.gov.
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