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Tax Glitch to Stall 660K Federal Returns

oopsFirst Intuit, now Block? The Internal Revenue Service says a glitch in which it called a "limited number of software company products" affected about 660,000 returns that claimed educational credits. The problem could delay refunds by as much as six weeks. And while the IRS did not identify which software was involved, H&R Block has been informing customers about problems with Form 8863.

The IRS revelation follows a weekend in which the Minnesota Department of Revenue warned its residents not to use any of Intuit's four tax preparation products to file either electronically or via paper. Intuit has issued an update and the department has outlined steps taxpayers there should take regarding specific errors.

The IRS said the problem involving the educational credits was for returns filed between February 14 and 22. The problem affects only the American opportunity credit, not the life-long learning credit.

Form 8863 had additional questions for taxpayers this year and the IRS did not begin accepting in until February 14. That could with updates to the IRS e-filing system and how that interacted with tax preparation software. The IRS said the returns are being delayed because the need for additional review.

Block spokesperson Gene King said important points are that the problems have been fixed, Block clients do not need to take immediate action and that the problem is not limited to Block clients. Block and the other providers that were affected are processing returns. Some Block clients have reported a change in their refund status since the IRS began processing the returns.

"It's important to note that the tax returns were prepared accurately. The error occurred in e-file processing," King said. H&R Block appreciates that the recent issue involving the filing of Form 8863 may be causing clients problems. We continue to work with the IRS on their behalf.

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