'American Opportunity Tax Credit': H&R Filing Error Delays Returns with Form 8863

Missed 'American Opportunity Tax Credit': H&R Error Delays 600K Returns with Form 8863The Internal Revenue Service said Wednesday that it is taking “special steps” to expedite a review and remedy of a filing error with Form 8863 that has caused a delay in tax refunds of possibly six weeks.
An estimated 600,000 returns processed by H&R Block are affected.
The filing issue has to do with Form 8863, on which parents or students can claim valuable tax breaks including the popular American Opportunity Tax Credit, which is tied to tuition and other college expenses and is worth up to $2,500 per student.
Angry clients of H&R Block expecting that credit or other education tax breaks from Form 8863 flooded the tax preparer’s Facebook page with complaints, some seeking refunds of their tax-preparation fees.
The IRS said such a problem would normally take up to 8 weeks to resolve, but it is working to speed up the review in order to send out refunds in less than 6 weeks.
The IRS said the filing issue affected some software company products that submitted Form 8863, Education Credits, between Feb. 14 and Feb. 22. The problem resulted in those tax returns requiring additional review by the IRS.
The IRS said it “is continuing to review the situation and working with affected software companies to assist in the processing of these tax returns. Typically, the review process for a situation like this takes up to 8 weeks. We are taking special steps to help taxpayers. This means the IRS may need as much as 4-6 weeks from this date to issue a refund to the taxpayer.”
H&R Block, the nation’s biggest tax preparer, initially confirmed on March 8 that it had encountered filing errors with Form 8863. It did so on its Facebook page.
But the IRS detected problems soon after it started processing Form 8863 in mid-February, and it issued an alert to all tax preparation professionals on Feb. 20.
The filing snafu is affecting about 10 percent of the 6.6 million tax returns with Form 8863.
H&R Block’s statement from its Facebook page:
“H&R Block has confirmed with the IRS that there was an issue with certain tax returns filed before February 22, 2013 that included certain education tax credits claimed on Form 8863. We have worked with the IRS to expedite a solution to this issue for all of our affected clients.”
H&R also said that clients who received the IRS notice stating it would take 6 to 8 weeks to receive a refund after this issue was resolved should not have to wait that long.  “We are assured it will not take that long,” H&R said.
On Feb. 14, the IRS started processing Form 8863, Education Credits. This form is used to claim both the American Opportunity Tax Credit (AOTC) and the Lifetime Learning Credit.
On Feb. 20, just six days after it started processing the education credits, the IRS sent an alert to tax preparers, regarding issues with Form 8863:
“We have observed instances in which the Form 8863, Education Credits, attached to the Form 1040 and 1040A is not completed correctly,” the IRS said at that time. “These instances are causing downstream processing delays.”
The IRS noted that it has experienced the following two conditions: (1) Form 8863, Part III, Line 25, Yes or No checkboxes are not completed when required, and (2) Form 8863, Part III, Line 26, Yes or No checkboxes are not completed when required.
In the Feb. 20 alert, the IRS also requested “that software packages be modified to require completion of the correct boxes on lines 25 and 26 when appropriate.”
The IRS also urged tax professionals to “communicate this information to the practitioner community to avoid delays in processing returns.”
H&R Block said the filing problem is with returns filed before Feb. 22 because the IRS changed the way it processes some of the “yes” or “no” questions on the form, according to MarketWatch.com. Previously, leaving a field blank to indicate “No” on certain questions was acceptable. The IRS is now requiring preparers to enter an “N.”
Today, H&R Block is also advising clients who are waiting to complete the FAFSA (Free Application for Federal Student Aid) form for college financial aid.
There are manual steps they can take that will allow their FAFSA application to proceed while their return is still processing, H&R said.
The Department of Education suggests:

  • If your return has not yet been processed by the IRS – you can manually enter the tax return data on the application.
  • Return to the online FAFSA form to update the information when your return has been processed.

This information is posted on the Department of Education website http://www.fafsa.ed.gov/
The “fiscal cliff” legislation enacted Jan. 2, 2013 extended the American Opportunity Tax Credit for another five years until the end of 2017.
The new law also retroactively extended the tuition and fees deduction, which had expired at the end of 2011, through 2013.
Many of those eligible for the American opportunity tax credit qualify for the maximum annual credit of $2,500 per student. Here are some key features of the credit:

  • The credit targets the first four years of post-secondary education, and a student must be enrolled at least half time. This means that expenses paid for a student who, as of the beginning of the tax year, has already completed the first four years of college do not qualify. Any student with a felony drug conviction also does not qualify.
  •  Tuition, required enrollment fees, books and other required course materials generally qualify. Other expenses, such as room and board, do not.
  •  The credit equals 100 percent of the first $2,000 spent and 25 percent of the next $2,000. That means the full $2,500 credit may be available to a taxpayer who pays $4,000 or more in qualified expenses for an eligible student.

17 thoughts on “'American Opportunity Tax Credit': H&R Filing Error Delays Returns with Form 8863

  • March 12, 2013 at 5:20 pm

    [Editor’s Note: This article has been updated several times. In all versions, the facts are fully verified and sourced to either the IRS or H&R].
    Your article is very inaccurate! H & R Block did answer the questions and answered them correctly, the taxpayers can look at their copy of the tax return and see that the form was completed correctly and the questions were answered! Your statement saying that H & R Block “Messed up” is very infuriating for H & R Block tax preparers and clients both! The error occured in the upload to the IRS computers. I doubt you did a very through research of the facts or you would realize that H & R Block did not MESS UP!! Computer miscommunications was at fault here and if you would do your proper research you would realize that you need to print a retraction of anyone MESSING UP!!! I have worked at H & R Block for over 30 years and we strive to complete every tax return correctly and take care of our clients to the very best of our abilities. IRS problems occur every year which delay refunds, just like last year with the First Time Homebuyers credit and the batch of clients (from every tax return preparation business) that got their refunds later than those that filed after them. Please do a little more research and see if I am not correct, and if you are a client look in your copies of the tax return and see for yourself these questions were answered and answered correctly!

  • March 12, 2013 at 6:28 pm

    Mess up, snafu, glitch — whatever you call it, it is still the responsibility of H&R block.
    This shouldn’t be deflected to computer miscommunications. See how customers feel about this at: http://www.facebook.com/hrblock

  • March 12, 2013 at 6:52 pm

    I think what upsets the H&R Block filers the most is the lack of communication between H&R Block and its customers. Most of them (myself included) have had to turn to Facebook blogs and other sources just to find out what the issue was in the first place. H&R Block is just recently letting its customers know…hey we had a problem. This is what happened, and this is what we’re doing to fix it. They posted a statement on Facebook? Is that acceptable customer service? No. So along with refunds being delayed, Blocks customers were given no straight answers. Even today, there’s mass confusion. we can’t get to the bottom of it because some of Blocks customer service reps still are not giving accurate information to its clients. Because of this, they will be losing a LOT of business next tax season.

  • March 12, 2013 at 7:41 pm

    What great news. I filled mine jan 28 and im still waiting

  • March 12, 2013 at 9:10 pm

    i filed january 30th….still waiting with NO deposit date set….this entire article relates to me. i am the unlucky bunch. I hate h & r block for this and will never go back. i dont care what people say….its their fault and should give my payment back for this.

  • March 13, 2013 at 2:39 am

    Well I have to say that I looked over my tax return form and both sections are marked off correctly. I did receive a an e-mail from H&R block stating what was said above, and I did do my returns on the 18th of February, but my forms are not missing any information that they stated. I want my return as much as the next person, but it’s better late than never. I just can’t waste my time getting upset over something like this, there are worse things.

  • March 13, 2013 at 4:44 am

    I’m with you Chris K. I just got this stupid e-mail informing me that I will have to wait up to 8 weeks to get the return I’ve been waiting for, for the last month because of some stupid glitch! 21 days my butt! Obviously if i’m in school I need my return for expenses and spare cash. I paid $110 to H&R Block to get this done when I could’ve done it myself online for free. I WILL NEVER GO BACK THERE!!! Their service is lousy, their preparers are rude and super slow. Thank you for ruining my Spring Break! I will be contacting someone at H&R Block tomorrow to get a refund on the money I paid for this preparation fee.

  • March 13, 2013 at 4:58 am

    I filled on January 24,2013 & I am still waiting for my return. I’m going crazy checking the status on the IRS website. Today I find a message from H&R block and the form for 8863 was filed incorrectly. I’m pissed off because I have called H&R block several times and ask if there was something I need to do? all they said was will call you when we get a check. Now, I was told to wait another 4-6 weeks? this is outrageous. I might do my taxes else where next year. Maybe turbo taxes? :0

  • March 13, 2013 at 5:03 am

    I filed on January 30th…and am still waiting with no completion date as of yet… this article relates to me also. I do also believe that this is Hr blocks issue and there has been no communication from them… We should be given our payment back for this.

  • March 13, 2013 at 5:45 am

    I have bills that need to be paid with that money. Bump the idea of giving us back the fee we paid. What about everything else? I need to be compensated for my inconvience. Glitch or not it was negligence. PLUS when I called H&R Block about the issue 02/14 they were so rude to me. They wouldnt give me a direct answer. So I called the IRS and was on hold for an hour and a half waiting for a rep. FINALLY, I was speaking with someone who knew what was going on and was willing to give me straight answers. He told me H&R Block had sent form in error. And my heart hit the floor.

  • March 13, 2013 at 6:42 am

    I filed February 20 and received an email from HR block and still waiting for return. I paid over $500 bucks to file, I want some answers. I checked form 8863 and looks good to me, what is the problem?

  • March 13, 2013 at 7:34 am

    Just another scam to delay millions of dollars back to taxpayers who paid their dues to beginwith. Since the government is broke this delay, will help funnel the costs. But hey i paid you this money already what did u do with it?

  • March 13, 2013 at 8:44 am

    For users threatening to leave HR Block for TurboTax, the State of Minnesota warns users “Don’t Use TurboTax.” It’s a lose-lose situation for HR Block and Intuit. The only common factor in these cases…filing taxes.

  • March 13, 2013 at 10:31 am

    hey Dawn (H n R block employee)
    Its may be a fact that the lines were fill out correctly on yoru end but I think most people are pissed because you guys are supposed to be tax professionals who had no information on why our refunds were delayed. No communications with you customer who paid a nice sum expecting for their return to come back in a decent timely manner . The lines on the forms may have been checked but because of the way you sent it to the irs cause the errors take responsibility for once and share in the blame can anyone CLASS ACTION LAWSUIT!!!!!!

  • March 13, 2013 at 10:43 am

    Don’t bother deserting H&R Block for TurboTax, they’ve got the same exact situation going on. My highest recommendation is for filers next year to use the paper forms and send in directly to the IRS, avoid using the online efile services. The one year I decide to use efile, 2013, and now having to deal with all this insanity. IRS said it will be end of April by the time my return is processed. I never had a problem before doing my own paper based taxes.

  • March 13, 2013 at 1:48 pm

    Nelgigence is now being called a glitch?

  • March 13, 2013 at 4:13 pm

    Yeah i also called HR block today my return was accepted FEB 15th and i still get the still processing deal from the irs website when checking my refund status. HR block rep tells me that there was a glitch in the system i asked if it was the irs or them that had the glitch. Was told it was a glitch (education credit) from all the tax software places yeah right. I was also told that it could be anywhere from 6 to 8 weeks since the glitch was fixed (MAR 8th i was told) so yeah late april or may i may see my refund…I spent 80$ on their tax software yet again for the 5th time in 5 yrs Hr block sucks ive had a problem every yr that ive used them. Unfortunately the other ones turbo tax ect ect arent much better they all suck. Seems like every yr it takes longer and longer to get my refund. What a joke the IRS blames the tax software companies and they blame the IRS they all pass the buck. Im sick of it when are they all gonna get on the same page 5yrs ago this wasnt a problem and now it gets worse every year. Why dont they just send checks out once a year or let people keep their tax money do away with all the BS.. Never got an email either they are lying scumbags and should refund all tax fees. i will not use HR Block software ever again which sucks because i dont have high hopes for any other ones either.

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