Income Tax Service

Terry Hough

GREENSBORO, NC: The Internal Revenue Service said taxpayers who want to claim itemized deductions will need to wait to file their 2010 tax return at least until mid-February.

Typically, taxpayers may begin filing returns in January, but late congressional action to extend individual tax breaks means the IRS needs more time to get its systems up to speed, the tax agency said.

"The IRS will work through the holidays and into the New Year to get our systems reprogrammed and ensure taxpayers have a smooth tax season," IRS Commissioner Doug Shulman said in a Thursday news release.

Taxpayers who want to claim deductions for mortgage interest, medical bills, state and local income tax or other items will be affected by the delay. About one in every three taxpayers who filed a return in 2010 took itemized deductions, the IRS said. Those who take the standard deduction won't be affected by the delay and may file as early as Jan. 14.

Most likely to be affected by the delay are people who are owed tax refunds, who tend to file early. Taxpayers with more complex returns and who owe taxes tend to file closer to the April 15 deadline or later.

The IRS said three provisions in that package in particular are a factor in the delay:

• the deduction for state and local sales taxes,
• a deduction of up to $4,000 for college tuition and fees, and
• a deduction for teachers for classroom expenses.

The agency stressed that all taxpayers who wish to claim itemized deductions will need to wait until mid- to late-February to file, even if they don't claim any of the three deductions mentioned above.

The delay could also have implications for businesses and people trying to get approved for home loans. Some mortgage lenders are no longer accepting 2009 tax returns as proof of income, and loan approval may be delayed until 2010 returns are processed,

Small businesses who want to use 2010 net operating losses to get IRS refunds for taxes paid in prior years could also see a two to four week delay, he said.

The IRS will announce at a later time a specific date when taxpayers may begin filing itemized returns. Returns filed before that date will be rejected and will have to be filed again.

President Barack Obama signed the tax law on Dec. 17 , which extends individual tax cuts for two years and renews a broad range of tax breaks.

Tax season complications caused by congressional dithering on taxes have become almost a yearly ritual. In 2008, some itemizers had to wait until Feb. 11 to file returns because of last-minute enactment of an alternative minimum tax fix. The 2007 season also saw a delay due to 11th-hour legislation.