The Savvy Consumer: Late tax law changes a setback for early filers

The federal tax season officially begins today, as the IRS starts to accept electronic filings, but many Texans will have to wait until mid- to late February for their annual appointment with Uncle Sam.

The IRS announced last week that changes Congress made in tax laws in late December mean the agency must reprogram its processing systems before accepting either paper or electronic tax returns. The new date will be announced soon.

This will affect anyone who files a Schedule A (itemized deductions) with their 1040. Also affected are teachers taking the classroom expense deduction, parents taking the higher education tuition deduction, those repaying first-time home-buyer credits (only those who took the credit in 2008 are affected) and those who bought an electric vehicle.

"Based on nationwide historical filing patterns, the IRS estimates about 9 million taxpayers could be impacted by the late changes involving these three provisions," said Clay Stanford, a spokesman for the IRS in Dallas. "It's important to keep in mind that most people do not file until after W-2s and 1099s arrive. These typically arrive in late January."

Local CPAs say that virtually all of their clients will be affected by the delay -- especially those who expect a refund, which now won't be in their hands until at least March.

"I have clients who use the IRS as their bank and file for a refund," said Doug McDougal, a Fort Worth CPA. "They may have to wait a little longer."

Texans are particularly affected because Congress extended the state and local sales tax deduction, which must be reported on Schedule A along with other popular deductions such as mortgage interest and charitable contributions, said Walter Hatter, a CPA at Hatter & Associates in Fort Worth.

"I'm going to have a lot of angry clients," Hatter said. "We have a wave of clients that come in the first two weeks of February to get their refunds, and the majority will not be able to file."

For the first time, preparers who file for 100 or more clients are required to file electronically, Hatter said.

Also for the first time, the IRS will not mail paper tax forms.

Tax-filing software used by accountants and the public has already been updated to reflect the last-minute changes in tax law, but the IRS has not finalized the forms, Hatter said.

"We can still gather all the information and the calculations will be correct," he said. "We just won't be able to file immediately for the clients."

Bob Meighan, a CPA and vice president at tax software giant TurboTax, confirmed that the company updated its software to reflect the changes. He recommends that TurboTax users affected by the new rules go ahead and fill out their forms, and the company will hold them and send an e-mail notification to taxpayers when it sends the returns to the IRS.

"We have to store the information. It's an IRS rule," he said. "But we don't look at it and we never use it. It's encrypted."

Meighan said the impact of the IRS delay, which also occurred for last-minute tax changes in 2008, will be minimal for those using TurboTax.

"Two-thirds of taxpayers don't itemize, with the standard deduction so high," he said. "This year it's $11,400 for married filing jointly."

One twist in the IRS delay is how it will affect people who get their refunds via a refund anticipation loan or check.

H&R Block will not offer refund anticipation loans this year after regulators ordered the bank providing them to stop in December.

But Block will offer a refund anticipation check for $32.95, and that fee will not change because of the IRS delay, according to Kate O'Neill Rauber, a spokeswoman for the tax service.

The refund anticipation checks, which give taxpayers their refund in eight to 15 days, are mostly for clients who do not have a bank account.

Jackson Hewitt also does not plan to change the cost of its refund anticipation loan in light of the IRS delay, according to a spokesman.

Also, there is one good bit of news from the IRS regarding the final deadline for filing taxes this year: Because of a local holiday in Washington, D.C., Americans have until April 18 to send in their tax forms this year.

Teresa McUsic's column appears Fridays.