Robert Engle was counting on a $7,200 residential energy tax credit after he installed $24,000 worth of solar panels outside his Treynor, Iowa, home just east of Council Bluffs.
He'll still get it, but it'll be late. Engle's accountant's take on when he can expect it? By the end of March — hopefully.
His situation is one of the effects of late tax law changes enacted Jan. 2 with the “fiscal cliff” legislation.
The Internal Revenue Service last week announced plans to open the 2013 filing season on Jan. 30 — eight days past the originally scheduled start. The extra days are to buy the IRS time to update forms and test processing systems.
A later opening filing date means later tax refunds processed, putting many taxpayers in a financial pinch.
“I'm actually going to use the money for a down payment on some land,” Engle said, “but it delays my ability to do things.”
To make matters worse, accountants say, taxpayers should expect their refunds up to 21 days after filing this year, six days longer than the historical 15-day average wait. John Hewitt, CEO and founder of Liberty Tax Service, who's starting his 44th tax season, said this year is shaping up to be one of the worst delays he's seen.
There always are some problems at the beginning of the tax season, said Chad Brown, CPA and owner of a Liberty Tax Service franchise in Council Bluffs and 13-year veteran in finance, “just nothing like this.”
The vast majority, or an estimated 120 million households, should be able to start filing electronically or on paper Jan. 30, the IRS said. It said those filers include those affected by the late alternative minimum tax and those claiming deductions for state and local sales taxes, higher education tuition and fees, or educator expenses.
But others have to choose between filing the bulk of their return on Jan. 30 and amending it later with the forms that needed major reworking caused by changed tax laws, or waiting until the updated form is ready and filing all at once. Most accountants recommend filing at one time.
That delay is painful for people, like Engle, who are waiting to file until the residential energy credit form is ready.
That credit, for example, is 30 percent of the cost of qualifying energy efficient property, which includes equipment like solar panels, solar water heaters and small wind turbines. It also includes labor costs for installing the equipment.
Other forms needing updates include the depreciation and amortization credit and general business credit forms. Once the IRS releases those forms, software companies will rush to update their programs that accountants use. The IRS says the list of forms getting updates could grow and to check back at their website, www.IRS.gov, for updates.
Brown said the delays are bad news for an economy still gaining traction and for families just coming off the holidays.
“A lot of folks get that money and already have an earmark for things or pay off Christmas bills,” he said. “Others go out and just buy new stuff. It'll be interesting to see the impact.”
Some business owners and partners can't file their personal returns until their business ones are finished, said Steve Kenney, a CPA and tax partner at Lutz & Co., who works closely with family-owned businesses.
That's a problem because it's not uncommon for businesses to be waiting on one of the forms, like the depreciation and amortization credit form, that the IRS has not released yet.
“Businesses get pushed backed and then individuals get pushed back,” he said, noting that many of his clients won't have the proper forms in hand until March 1, giving him a short six-week period until April 15 to finish up returns.
The bright side, Kenney said, is that the tax changes affected mostly people with a higher net worth and more complicated returns, and those people generally didn't file early, anyway.
But that doesn't take away the confusion.
“It is frustrating,” he said. “We're getting calls, and people are just confused with what the changes are.”
It's not uncommon for “everybody to need their refund yesterday,” said Ed Leahy, director of the Omaha Earned Income Tax Credit Coalition, a program that helped more than 4,000 low-income people file their taxes last year.
“It's not easy to wait for it, but patience is going to be the virtue to carry us through this crisis of leadership,” he said.
The only thing taxpayers can do now to get a speedier tax refund is to file electronically, the IRS said. More than 80 percent of taxpayers e-filed last year. The IRS also said taxpayers who file on paper will have no advantage by filing before Jan. 30.
Although Engle said he's planning to file electronically and for now is trying to remain calm, the delay wasn't what he, or millions of other Americans, signed up for. The tax incentive was what made the solar system an attractive option for him in the first place. Otherwise, he said, it would have been too expensive.
Now, Engle's plan for buying land is unclear.
“The only other place I have to borrow the rest of the money would be pulling it out of a retirement account,” he said. “It does put you between a rock and a hard place.”
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