By Bob Sullivan Technology correspondent
updated 1/23/2004 1:49:34 PM ET 2004-01-23T18:49:34

A glitch in Internal Revenue Service software caused the agency to accidentally reject thousands of e-filed tax returns earlier this week.  The flaws have been fixed and returns are now being processed properly, said agency spokesperson Terry Lemons. 

The glitch impacted "a small percentage," of returns, Lemons said.  E-filing season began on Jan. 16, and more than 100,000 returns are arriving daily, he said. Software engineers raced to fix the flaws,  and had IRS systems working normally by Jan. 21, Lemons said.

Returns that were rejected had to be re-filed, Lemons said. Consumers were made immediately aware of the problem, because the IRS sent a message to the filer indicating there was a problem with the return.

"Of course, we regret any inconvenience," he said.

While the errors were caught quickly enough that there will be no delays in IRS-issued tax refunds, Lemon said, consumers who applied for "refund anticipation loans" were delayed.

Professional tax preparers now regularly offer such loans, which are issued against expected tax returns. But the loans are only granted to e-filers once the IRS sends back an acknowledgement to tax preparers that the tax return has been accepted and that there are no outstanding federal tax debts which could reduce the amount of the refund.

Lemons said small glitches are customary in the early part of the tax return season.

"At the start of every filing seasons, we have to update all the software to reflect tax law changes," he said. "It's a complicated set of software. It has 55 million lines of computer tax code."

Denise Sposato, spokeswoman for H&R Block, told the Associated Press that the firm was quickly notified by the IRS and informed its customers, some of whom were not happy to hear about the delay.

“Fast isn’t fast enough for everybody,” she said.

Last year, about 40 percent of consumers filed their returns electronically, some 53 million people. E-filers can get tax refunds in about two weeks, half the time it takes for the IRS to send refunds to paper filers, Lemons said.

The Associated Press contributed to this report.


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