Blank spaces — instead of simple “No” answers — on a few questions on Form 8863, Education Credits, seem to have started software snags and processing backups, not long after the Internal Revenue Service starting accepting this form on Valentine’s Day.
It is unclear whether H&R Block, the largest U.S. tax preparer, or the IRS or a software glitch is to blame for the scrambling and troubleshooting that followed.
A quick resolution is mainly what matters to the estimated 600,000 H&R filers who are frustrated and angry at a possible 6-week delay in getting their tax refunds.
They want their money as soon as possible and more details about the delay, which has been simmering for 3 weeks.
Those students or their parents who claim the American Opportunity or Lifetime Learning credits have to fill out the form. The credits are tied to tuition and other college expenses, and are worth up to $2,500 per student.
Both the IRS and H&R Block say they are working together to expedite refunds. The IRS said it is taking aggressive “special steps” to make the delay period closer to 4 weeks, or sooner.
The IRS said that it is “aware of a problem with a limited number of software company products.” H&R Block has been mainly blaming the snafu on software glitches and IRS changes to the form, according to several tax filers who have talked to H&R staff.
H&R Block today did not reveal any new details on its Facebook page, where it has posted updates since last week. The company’s clients are angry, as reflected in Facebook comments. Many complain of a lack of regular and concise communication about the delays.
H&R Block did say the following in an issued statement: “The IRS has informed us and other impacted providers that they are currently processing returns. This review process means the IRS may need 4-6 weeks from this date to issue a refund. The IRS is working to address this situation and hopes to reduce those projected refund time frames.”
H&R Block said clients who have received a letter from the IRS and have yet to respond, can call their local H&R Block office or 800-HRBLOCK.
What is very clear is that problems with Form 8863 have been brewing since Feb. 20, when the IRS sent all tax accounting professionals an alert about the blank spaces in certain fields on the form.
The IRS noted at the time that “Yes or No check-boxes were not completed when required” on two lines of Form 8863.
In a March 4 blog post, Scott Gulbransen, H&R Block director of social business, explained the issue a littler further.
“In previous years, H&R Block has transmitted a ‘Y’ for Yes and a blank for No for questions 22-26 on Form 8863,” Gulbransen wrote. “The IRS no longer accepts this format leading these returns to be reviewed further, but without delaying the estimated 21-day refund cycle. Once we learned of this change, we worked to comply with the new IRS process and now are transmitting an “N” for a No answer.”
What remains unclear is when and why the issue snowballed into the IRS changing its posture from its typical “21-day refund cycle” to a possible 6-week delay.
Gulbransen also said: “This year, the IRS changed the way it processes and accepts answers to some ‘Yes’ or ‘No’ questions on Form 8863 as transmitted by H&R Block and other tax preparers. Once we learned of this IRS change, we worked to comply with the new IRS process.”
Many college students who claim Form 8863 rely on financial aid, although most students normally fill out the Free Application for Federal Student Aid (FAFSA) application annually to qualify for many grants and scholarships.
Jane Glickman, spokesperson for the Department of Education, told Forbes.com that college students cannot use the IRS Data Retrieval tool with FAFSA until their tax returns are fully processed.
Applicants can, however, still fill out the FAFSA application online and manually input the data from their tax returns.
The IRS Data Retrieval Tool allows applicants who have filed their federal income tax returns to pre-fill the answers to some questions on the FAFSA. The tool transfers data from their federal income tax returns.
If information changes, applicants can go back online and correct it.
Glickman said the Department of Education has not heard concerns regarding missed deadlines due to the Form 8863 issues.
She said that the Department and the IRS are “working through any issues that may ensue to ensure that they do not impact FAFSA applicants.”