Some Taxpayers Experiencing Refund Check Delays for 2010 Tax Returns

July 22, 2011 by  Filed under: Taxes 

Most taxpayers who beat the 2011 April tax deadline got their tax refund checks in good time and did not experience any tax refund delays. However, for some groups of people, the 2011 tax season had issues that caused some delays in their tax refunds. These delays in tax refunds extended beyond 5 months of the expected time of refund distributions. The delays caused a lot of anxiety amongst the affected taxpayers, as many of them had their financial plans disrupted because of the delay. Two of the groups of taxpayers who experienced refund checks delays for the 2010 returns are:

The Adoption Credit

One of the groups that experienced delays in the tax refunds in the 2010 tax filing was the taxpayers who had applied for the Adoption Credit. For the first time in 2010, the Adoption Credit became a refundable credit. This means that if a taxpayer had a credit in their IRS tax balance after their tax liabilities were fulfilled, the IRS paid him/her a refund check for this balance. Prior to 2010, the credit was not refundable and one could only use the credit for future tax liabilities, up to a maximum duration of 5 tax years. However, the change of the credit to refundable status enables parents to receive cash on any credit that remained outstanding for 5 years.

The Adoption Credit is a tax relief, given to taxpayers who have adopted children. The credit is distributed to assist those who managed the high fees associated with adopting a child. The costs of adopting a child in the U.S. averages at $30,000.00 and to create an incentive for households to consider adopting children, the IRS provides a tax credit of up to $13,170.00 a child. Some households who had adopted multiple children expected refund checks of up to $65,000.00. Given the high values of the refund checks expected by those who had adopted children, the IRS decided to apply extra scrutiny towards the tax returns of those who had claimed the credit. The extra scrutiny led to a delay in the refund checks of this group of taxpayers.

The 2008 First-Time Homebuyer Credit Receivers

The other group of people who experienced tax refund delays for the 2010 tax year was the applicants of the 2008 First-Time Homebuyer Credit. The 2008 homebuyer credit was given to taxpayers in the understanding that they would pay back the credit to IRS starting 2010. The taxpayer was expected to pay $500.00 every year starting from 2010 until the whole amount of the tax credit was paid off. In 2008, the maximum tax credit for the first-time homebuyer was $7,500.00. In 2009 and 2010, the homebuyer credit was changed into a regular tax credit and the receivers were not required to repay the credit advanced. Therefore, the repayment requirement of the tax credit only applied for the 2008 homebuyers. Since this credit was not a typical type, the IRS delayed the refund checks for this group of people.

The taxpayers who were most affected by the refunds delay relating to the 2008 homebuyer credit were mainly those that filed jointly as couples, those that were paying more than the minimum $500.00 installments, and those that submitted their tax returns before February 2011. The IRS attributed the delays to computer errors and said that the returns had to be processed manually for the affected taxpayers, which caused the holdup. Five months after the passing of the April tax deadline, some refunds are unfortunately yet to be received by these affected taxpayers.

Rob L Daniel and partners of Limon Whitaker & Morgan, for years have helped businesses and individuals Nationwide, with their delinquent IRS & State tax problems. The firm is based in Los Angeles, California USA. / Tel:888.321.6188

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