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H&R Block error causing lengthy tax refund delays for customers

About 600,000 H&R Block customers face lengthy delays for tax refunds after a filing error by the tax preparer, the Internal Revenue Service says.

March 13, 2013|By Ricardo Lopez and Adolfo Flores, Los Angeles Times
  • A filing blunder by H&R Block and other tax preparers affects customers — mainly students — who filed Form 8863 for education credits. Above, a man waits in the lobby of an H&R Block office in Los Angeles last month.
A filing blunder by H&R Block and other tax preparers affects customers… (Bret Hartman, For The Times )

Some taxpayers splurge on big-screen televisions or pay off their credit cards with their tax refund, while others, like Brandon Frank, count on it to pay rent.

The 25-year-old former construction worker from Michigan and father of three may have to wait as long as six weeks before he sees his refund, because of a filing error by H&R Block.

"I was counting on it for rent," said Frank, who's been unemployed since October and is attending college. "I'm probably going to have to go to one of the cash-advance places, because the money I was expecting isn't there."

He's among 600,000 H&R Block customers who face lengthy delays for tax refunds after a filing error by the tax preparer, the Internal Revenue Service said late Tuesday.

The filing blunder affects customers — mainly students — who filed Form 8863 for education credits from Feb. 14 to Feb. 22. Many were upset that the delay would affect applications for federal financial aid for college.

"The IRS is continuing to review the situation and working with affected software companies to assist in the processing of these tax returns," IRS spokeswoman Michelle Eldridge said in a statement.

The IRS said the review process for affected tax returns could take as long as six weeks and said similar errors had also affected customers of tax preparers other than H&R Block. The blunder affects roughly 10% of all tax returns filing for the education credit.

The issue arose in the way the IRS processed "yes" and "no" questions on Form 8863. In the past the IRS accepted a blank field to mean "no" on the form, but because of changes this year it required manually entering "no."

"The IRS is processing returns as we speak, and we've seen some clients already receive notification that their returns are being processed," H&R Block spokesman Gene King said.

The delayed returns are unlikely to affect H&R Block, which expects to process about 15 million returns this year, said Mark Palmer, an analyst with BTIG. The snafu might send some customers to competitors such as Turbo Tax, but the effect will be minuscule, Palmer said.

"I don't see this as necessarily stalling the company's momentum," he said. "Frankly I think there's a question of how many of H&R Block's customers are even going to be aware that this occurred."

Still, irate customers have posted to H&R Block's Facebook page. Many demanded their filing fees be reimbursed and pledged to never again use the services of the tax preparer.

"Thank you for over 18 years of service, but this will be our last tax year together," one woman wrote after detailing financial difficulties the delayed refund has caused.

H&R Block said it is working with the IRS to expedite the affected tax returns.

"We apologize for the inconvenience this has caused and we're glad to hear some clients are already seeing their refund status change due to work with the IRS," the company posted Tuesday on its Facebook page.

H&R Block typically handles nearly 1 in 7 U.S. tax returns, according to the company.

Last year, 25 million people used Turbo Tax, said Julie Miller, spokeswoman for Intuit, the Mountain View, Calif., company that owns the online tax preparation service.

The error that affected some H&R customers will not affect Turbo Tax filers, Miller said.

"TurboTax customers who claimed Education Credits when filing their taxes ... can be confident that their tax returns were filed correctly with the IRS," Miller said.

H&R Block stock closed Wednesday at $28.19, up 48 cents, or 1.7%.

ricardo.lopez2@latimes.com

adolfo.flores@latimes.com

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