Tax Refunds....Delayed???

Tax season is once again upon us. By this time, most people (including myself) have already counted the ways to spend their tax refund. There are many wonderful uses for it. You can be practical and pay off some debt. Another practical use is rolling that refund into your 401(k) or an IRA. But you also have the option of splurging for that new HD big screen TV or a new car. Choice is what makes America great. But this year, a great number of Americans are going to have to wait a little longer to spend that money.


The Alternative Minimum Tax (AMT) has been around since the Tax Reform Act of 1969. The original idea behind it was sound. There were over 150 very wealthy households that too so many tax credits that they didn't owe anything to uncle sam come tax time. For a time, the AMT only punished the most wealthy of us. But over the years, as tax cuts have come along and salaries have risen, the AMT has become one of the bigger hobgoblins of the tax code. Each year it is affecting more and more people. In 2006, it affected about 4 million tax payers. In 2007, it could affect anywhere between 4 and 20 million taxpayers. And by 2010, that number could be as high as 1 in every 5 taxpayers. The clever idea that originally was affecting the richest of the rich would begin to target the middle class.

So at the end of 2007, Congress took action. Unfortunately, their actions came a little too late. The IRS had already created, refined, and tested the AMT forms by the time that Congress has implemented a fix. This will cause the IRS delays and ultimately delay tax refunds for a large number of people. If you file any of the forms below, you will likely be affected:

Form 8863 Education Credits
Form 5695 Residential Energy Credits
Schedule 2, Form 1040A, Child and Dependent Care Expenses for Form 1040A Filers
Form 8396, Mortgage Interest Credit
Form 8859, District of Columbia First-Time Homebuyer Credit

With no disrespect to the other 3 forms, the 2 forms that will affect the majority of Americans is the Educations Credits and the Child and Dependent Care Expenses. The Education Credits will delay refunds for both parents and students putting themselves in college. The Child and Dependent Care Expenses are for working couples who need to pay for daycare expenses for 1 or more children.

Early projections indicate that these 5 forms could affect over 13 million tax refunds. The IRS is hoping to have these issues resolved by February 11th. For all the working couples, parents, and students, let us hope that is the case.