IRS e-file glitches trigger refund delays

The U.S. Internal Revenue Service's new software system for handling electronic tax returns has experienced problems during the tax filing season, angering some taxpayers whose refunds have been delayed.

In an issue that could draw congressional scrutiny, the IRS has said it was addressing the software glitches and that delays in sending refunds to taxpayers would be minimal.

The tax collection agency has made a big commitment to upgrading its software and has been expecting to shut down its old system in October. "A final decision on that won't be made until after the filing season and after we have a chance to have additional conversations with" tax return preparers, said IRS spokesman Frank Keith.

The IRS said delays in sending out refunds began in February. "There were probably several million taxpayers whose returns we took longer to process," Keith said.

But the IRS has largely caught up, and the number of refunds sent out is now on a par with last year, he said.

Some tax preparers said they are facing angry customers upset by the late refunds.

The IRS had projected taxpayers who got 2012 electronic returns in by April 15 would get direct-deposit refunds seven to 13 days later; or 17 days for mailed refunds. That projection was expected to improve on the previous year, when direct-deposit refunds went out eight to 15 days after e-files came in; and 22 days for refund checks sent in the mail.

Keith said most "taxpayers this year did receive and will continue to receive their refunds within that period" that the agency had projected.

Some tax preparers said that outlook was too optimistic. Mark Steber, chief tax officer with Jackson Hewitt Tax Service, said: "The delays -- and IRS not being as communicative as perhaps they could have been -- have left many consumers frustrated and confused over the timing of their refunds."

IRS Commissioner Doug Shulman has made e-file a top priority for the agency. The IRS tax return system upgrade is estimated to cost $1.3 billion through 2024, the Government Accountability Office said.