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Estimated reading time: 3 minutes, 43 seconds

Tax Season 2013: Delays, But No Disaster

Mike D'Avolio, IntuitThe country did not plunge over the fiscal cliff, at least not in January. And processing to tax returns will start later than planned. But tax software vendors and the Internal Revenue Service did not wait for the outcome - they placed bets on which expiring tax credits would be extended.
The process is designed to avoid particularly long periods of translating changes into software, says Mike D'Avolio, a tax expert with Intuit. In particular, the IRS assumed that the Alternative Minimum Tax provisions would be extended because that would have been the hardest patch to implement if the bet had been wrong.

"The AMT patch can take six weeks. They [the IRS] ran under the understanding it would be extended," he said.

So software has been hitting practitioners' offices with updates coming rapidly. The Modernized e-filing system opened this morning for several business tax returns. Retail stores are doing business with Jackson Hewitt formally celebrating the opening of its stores in Sears. And retail promotions are rolling out with H&R Block trumpeting free second looks at prior year returns.

For companies publishing professional tax preparation software, business was moving along normally, according to a statement from CCH. "As we do every year, weekly updates are provided for last minute compliance and/or form changes. These weekly updates begin now through April. ProSystem fx Tax did not have any delays due to Congress or the IRS," the CCH statement read.

But that does not mean everything is normal. The IRS had planned to start processing returns on January 22, but on January 8 extended that to January 30. Even with the January 22 date, John Hewitt, CEO of Liberty Tax, had warned of delays in refunds. Given the earlier date, he had expected most refunds would not be made until at least late February. And the states, dependent on the federal action, will be late with forms in many cases.

Hewitt said California, Delaware, Mississippi and Vermont, among others, will not release until the end of the month. Illinois, Maryland, Michigan, Ohio and Virginia are expected to release in the second or third week of January, Hewitt said in a prepared statement.

Hopefully, the states have been making the same kind of bets that Intuit's D'Avolio describes. In fact, with many of the expirations recurring issues, that helps with the guess work and shortens the development cycle.

"It's not as long as you'd think - a lot of the extender provisions are repeat offenders," he says. However, the AMT extension overshadowed everything given the time it would have taken the IRS to change its huge, and sometimes creaky system. "There are not able as easily to flip the switch. It's pretty cumbersome," he says.

To help clarify the situation, software publishers were issuing guides to the tax law changes. CCH has published its Tax Briefing: American Taxpayer Relief Act, Thomson Reuters has come out with RIA's Complete Analysis of the American Taxpayer Relief Act of 2012 and Earlier Acts of the 112th Congress while Automatic Data Processing offered information through its "Eye on Washington" web page located at www.adp.com/regulatorynews.

Meanwhile, the IRS today reminded electronic return originators not to file returns without all Forms W-2, W-2G, and 1099-R from the taxpayers. And it outlined which taxpayers can start filing on January 30 and which must wait. Those affected by the AMT patch along with the extenders for those claiming the state and local sales tax, higher education tuition and fees, and educator expenses deductions

Because of forms that require more extensive programming changes, others will have to wait. These involve those who must file forms such as Form 5695 (Residential Energy Credits), Form 4562 (Depreciation and Amortization) and Form 3800 (General Business Credit).

Bob Scott
Bob Scott has provided information to the tax and accounting community since 1991, first as technology editor of Accounting Today, and from 1997 through 2009 as editor of its sister publication, Accounting Technology. He is known throughout the industry for his depth of knowledge and for his high journalistic standards.  Scott has made frequent appearances as a speaker, moderator and panelist and events serving tax and accounting professionals. He  has a strong background in computer journalism as an editor with two former trade publications, Computer+Software News and MIS Week and spent several years with weekly and daily newspapers in Morris County New Jersey prior to that.  A graduate of Indiana University with a degree in journalism, Bob is a native of Madison, Ind
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