H&R filers frustrated by refund delay

H&R Block says the education credit glitch has been fixed.
H&R Block says the education credit glitch has been fixed.

What would a tax season be without confusion and last-minute changes?

First up, a lot of H&R Block customers are irate about a problem that will delay their federal tax refunds by weeks.

For days, H&R customers complained on Facebook that they weren’t getting a clear explanation as to why their refunds were being delayed. As it turns out, there was a problem with returns that included Form 8863, which is used to claim two higher education credits — the American Opportunity Tax Credit and the Lifetime Learning Credit.


“H&R Block has confirmed with the IRS that there was an issue with a limited number of software company products that affected some tax returns filed between Feb. 14 and 22, 2013,” the company said in a statement.

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The IRS says the glitch has affected about 10 percent of the 6.6 million total returns claiming the credit. “The problem resulted in those tax returns requiring additional review,” the Internal Revenue Service said.

H&R Block won’t say how many of those returns were prepared by the company, noting that the language in the IRS statement said the problem involved a “limited number of software company products.” Yet it’s been mostly H&R Block customers who are taking to the Internet. A “Demand H&R Block Refund Our Filing Fees” page has been created on Facebook.

“I’m not able to divulge how many of our clients are impacted, but we are contacting them all directly,” H&R Block spokesman Gene King said in an e-mail.

King said any problems that occurred with Form 8863 have been fixed and that H&R Block clients need to take no immediate action.


“It’s important to note that the tax returns were prepared accurately,” he said. “The error occurred in e-file processing.”

The IRS issued an alert to tax professionals Feb. 20, pointing out that they had noticed instances in which certain checkboxes on Form 8863 were not correctly completed, causing processing delays. Software packages needed to be modified to correct the issue, the alert said.

The IRS said that in a situation like this, it can typically take up to eight weeks to resolve the problem. But the agency is working to speed up the process. However, it “may need as much as four to six weeks” to get refunds to taxpayers.

The delay in processing the returns may also affect families applying for financial aid through the Free Application for Federal Student Aid. If you are impacted, you can enter your tax return information manually and later update it once your return has been processed.

The IRS said taxpayers who filed a Form 8863 with their return during the time period in question can check “Where’s My Refund?” on


On to another issue for this tax season and next.

If your lender cancels or forgives your mortgage debt, you generally have to pay tax on that amount. The lender is required to report the amount of canceled debt to you and the IRS on a Form 1099-C, Cancellation of Debt.

But during the housing crisis, when foreclosures across the country skyrocketed, Congress passed the Mortgage Forgiveness Debt Relief Act. It was designed to provide at least some relief to people who had lost their homes.

The act was scheduled to expire in 2012. But as part of the last-minute deal to avoid the fiscal cliff, the debt relief was extended for one more year, until Dec. 31, 2013.

The law allows people to exclude income from the discharge of debt on their principal place of residence. In addition to foreclosure, debt reduced because of a mortgage restructuring also qualifies.

The maximum qualified debt that you can exclude under this exception is $2 million, according to the IRS. The limit is $1 million for a married person who files a separate tax return. If you qualify, report the excluded debt on Form 982.

Ah, just another complicated tax year.

Michelle Singletary can be reached at singletarym@