H&R Block Gaffe Affects 600,000 Tax Returns

By Ken Berry

So you think you've got headaches this tax return season? They're probably nothing compared to the migraines the folks at H&R Block are experiencing after the nation's largest tax preparation firm admitted to botching more than 600,000 returns. The bungle – which is an error of omission rather than commission – could delay tax refunds from Uncle Sam by as much as six weeks. 
 
The snafu affects taxpayers who used H&R Block to claim a higher education tax credit on Form 8863, Education Credits (American Opportunity and Lifetime Learning Credits), if the return was filed prior to February 22, 2013. 
 
Taxpayers may be eligible to claim either of one of the two higher education tax credits for qualified expenses in lieu of claiming a tuition deduction. The maximum American Opportunity Credit, which was recently extended through 2017, is $2,500, while the maximum Lifetime Learning Credit is $2,000. Both credits are subject to phase-outs at certain income levels. The IRS says the foul-up affects approximately 10 percent of the returns claiming the credit.
 
H&R Block is blaming the mistake on a change by the IRS in the way it processes the "yes" or "no" questions on Form 8863. In previous years, the tax prep firm says that leaving a field blank to indicate "no" on some questions was acceptable, but now the IRS is requiring preparers to enter an "N." The software used by H&R Block left a mandatory field blank.
 
On March 13, H&R Block fessed up to the problem on its Facebook page. "There was an issue with a limited number of software company products that affected some tax returns filed between February 14 and 22, 2013," it posted. "These affected returns included certain education tax credits claimed on Form 8863." Later that same day, the IRS issued a statement that the error could impact approximately 600,000 returns. 
 
Because these returns have already been filed, the IRS will have to work through the arduous process of identifying them and correcting them. It could take as long as four to six weeks to sort through the mess, although the IRS is hoping to move things along faster. This could be distressing news to taxpayers who were counting on refunds to pay living expenses and other bills. To make matters even worse, tax filing season was already delayed while the IRS scrambled to revise 2012 forms and schedules following the "fiscal cliff" deal in January.
 
In the meantime, the IRS says that taxpayers who filed Form 8863 can continue to check the "Where's My Refund?" feature on the IRS website to determine the status of their refund. If taxpayers haven't received a refund date and filed during the affected period, they should contact their software provider to determine if they may be in the affected group.
 
Finally, the IRS is reminding reminds taxpayers that Where's My Refund? is updated overnight, so there's no need to check it more than once a day.
 
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