Many taxpayers will not be able to file early this year.

Update as of 1/21/2011:

The IRS announces they will start processing delayed returns on Feb. 14, giving a different emphasis to the Valentine’s holiday this year.

Although individual income tax returns don’t have to be filed until April 15, (extended to April 18 this year) taxpayers who file early get their refunds a lot sooner. The IRS normally begins accepting returns in January but does not starting processing returns until February.

However, taxpayers affected by three recently reinstated deductions and those who itemize deductions on Form 1040 Schedule A have to wait until mid- to late February to file their 2010 federal income tax returns. The filing delay is due to late tax law changes that affected set-up of IRS processing systems.

Taxpayers claiming any of these 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.

Affected taxpayers fall into three categories:

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 enacted Dec. 17. This primarily benefits people living in areas without state and local income taxes and is claimed on Schedule A, Line 5. Because of late Congressional action to enact tax law changes, anyone who itemizes and files a Schedule A will need to wait to file until mid- to late February.

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.

The IRS will release a specific date in the near future when it can start processing tax returns affected by the late tax law changes. Until then, affected taxpayers cannot submit their returns until IRS systems are ready to process the new tax law changes.


About Don James, CPA/PFS, CFP
Don is the Tax & Financial Planning partner with Kiplinger & Co., CPAs headquartered in sunny Cleveland, Ohio since 1982. He partners with business owners and families and specializes in goal achievement solutions, tax minimization strategies and serves in the role of gatekeeper of sound financial advice.

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