Arden Dale for the Wall St. Journal writes: Many taxpayers who banked on early refunds from the Internal Revenue Service this year won't see that money quite as soon as they wanted. Not only was the start of tax season pushed back to late January due to last-minute wrangling by Congress in 2012, but the IRS won't accept forms to claim a host of assorted tax credits until early March. Financial advisers have started to hear from people who planned to use early tax refunds to wipe out credit-card debt, fund a vacation or pay estimated taxes for 2013. Some clients have done their returns, signed them and set them aside until the IRS will take them. "We're just kind of standing here holding the bag," said Stacy Francis, president and CEO of advisory firm Francis Financial in New York City, which manages around $90 million.
One client, a New York lawyer, expects a refund of around $50,000 because she overpaid her estimated taxes last year. She planned to use it to pay estimated taxes for 2013, Ms. Francis says, but the IRS has said it won't accept her Form 5695--for residential energy-tax credits--until the first week of March. So the client is tapping an emergency fund to make the estimated payment.
Last week, the IRS published a list of Form 1040-related forms it will accept in March. They range from the popular, such as the residential energy credit, to the somewhat obscure, such as Form 5074, for the Allocation of Individual Income Tax To Guam or the Commonwealth of the Northern Mariana Islands.
A client of Scott Anderson, an accountant in Newport Beach, Calif., plans to use money she expects to get back from the IRS to fund her retirement plan. A single mother who works as the office manager in a medical practice, the woman had to wait to file, though, because she needed Form 4562, which lets her write off depreciation on rental properties she owns. The form is widely used, but the IRS didn't accept it until Feb. 10.
Refunds can be important for taxpayers across the socio-economic spectrum. The wealthy may be due them as the result of overpaying estimated taxes--and are often just as adamant about getting their money back as are the less affluent, who may depend on refunds just to make ends meet.
Byron Shinn, an accountant in Bradenton, Fla., whose clients include physicians, says it's common to hear from them on the issue. "As people discuss items at the water cooler, timing on IRS refunds comes up, and then if a client is waiting longer than their friend, we get a call," said Mr. Shinn.
Advisers are taking the opportunity this year to remind clients who are too dependent on refunds that they need to budget themselves better. Depending on a refund is never a good idea, even when the IRS isn't experiencing special delays, as in 2013.
Refund delays in general are a top problem at the IRS, according to the National Taxpayer Advocate, an independent organization at the agency that acts as a watchdog over it. Last year, the group said in a report to Congress that many delays are due to a fraud-detection process the IRS uses to catch questionable tax returns. Sometimes taxpayers fail to get a refund they were entitled to, the report said.
For those who have been able to file a 2012 tax return, the flow of refunds seems good so far. The IRS said in a statement on Feb. 14 that it is seeing "a good start to the filing season, and tax refunds are being issued timely." Nine out of 10 taxpayers typically get refunds within 21 days when they use e-file with direct deposit, the IRS said. For anyone who wants to check up on a refund, a tool on the IRS website lets a taxpayer enter a social security number to check its status.
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