Tax preparers are warning that consumers may see a delay in getting their tax refunds back from the federal government given how late Congress approved the deal to avoid the fiscal cliff.
However, the Internal Revenue Service says late changes to federal tax laws should mean only a short delay for most taxpayers to file their 2012 returns.
The agency said Tuesday that more than 120 million taxpayers - about 80 percent of all filers - should be able to start filing their federal returns on Jan. 30. Others will have to wait until late February or March to file because the agency needs time to update and test its systems.
Those who will have to wait include people claiming residential energy credits, depreciation of property or general business credits. The filing season had been slated to start Jan. 22 but was delayed because of the big tax package passed by Congress Jan. 1.
On the other side, Liberty Tax Service said the American Taxpayer Relief Act of 2012 made many changes to tax law, which affected the forms to be used for 2012 tax returns, and the company said the IRS will need to work at an unprecedented pace in order to get the needed tax forms released to the various tax preparation firms and software companies, as well as to taxpayers.
The IRS had previously announced that it would not begin to officially process any tax returns until Jan. 22, which is approximately one week later than has historically been the case, Liberty Tax officials said in a press release.
"This late start, even if the IRS holds to the Jan. 22 date despite the late-breaking tax changes, could mean delays of federal refunds anywhere from 10-21 days, when compared to prior years. In some cases, the delays for paper tax return filings may exceed those for electronically-filed returns," the company said.
"Refunds will be delayed until at least February for almost everyone. That is the latest ever since the advent of ‘national' electronic filing," said John Hewitt, Liberty Tax CEO.
In addition, approximately 30 states are affected because their tax forms and instructions could not be finalized until the federal issues were resolved. Some states may not release their tax forms until the end of January, while many other states are expected to release their forms no sooner than the second or third week of January; it was not immediately clear when Georgia would release its forms.
"This has been an epic beginning to tax season 2013," Hewitt said. "I'm starting my 44th tax season looking at the possibility of the worst delays in filing I have ever seen. Fortunately, we have the most experienced management team of any tax preparation company and are ready to navigate these rough waters."
The company said that now more than ever taxpayers will want to obtain the maximum amount of tax credits and deductions to which they are entitled. The fiscal cliff bill extends tax credits for families with children, unemployment insurance, the tuition tax credit for families and other tax benefits that were scheduled to expire.
The Associated Press contributed to this report.