On October 30, at the 2014 fall meeting of the Council for Electronic Revenue Communication Advancement (CERCA), Internal Revenue Commissioner John Koskinen warned that the upcoming 2014 tax return filing season could get off to a late start on October 30 at the 2014 fall meeting of the Council for. There are many reasons causing the possible delay, including budget restraints, temporary tax breaks, etc. It is believed that the delay is largely due to the tax breaks whose fates are uncertain.
There are currently more than 50 tax breaks that generally expire every few years. These tax breaks have already lapsed for 2014, and Congress is dragging its feet on resolving these temporary tax extenders. We have seen the IRS delay the start of the filing season for 2013 because of the late Congressional action on tax legislation. Congress might follow recent practice and extend the breaks again for 2014 and 2015; however, with the uncertainty continuing into December, this could push back the beginning of the filing season and delay tax refunds for millions of filers.
In addition to the potential delay of the 2014 tax return season, taxpayers should also be expecting some additional difficulty in getting the IRS on the phone. While during the 2014 tax filing season the IRS was able to answer taxpayers’ phone calls 72% of the time (higher than in the year before), the percentage is likely to drop to 53% in 2015. The average hold time is expected to increase to 34 minutes for taxpayers and 52 1/3 minutes for the practitioner priority hotline.
The ongoing decline in IRS resources seems to have imposed a challenge to its ability to fulfill its mission and provide adequate levels of taxpayer service. Mr. Koskinen noted that the IRS in fiscal 2014 and 2015 is operating under same level of funding as in 2013, a total of about $11.3 billion, or $850 million below its 2010 funding. That means that its budget has declined 7% since 2010 and full-time employees dropped by 13,000, while the number of taxpayers it serves increased by 7 million, he said. The IRS’s obligations to process returns timely and implement law changes—without any increased funding—have necessarily reduced resources for taxpayer service.
Another hurdle for the 2014 tax return filing season is the new compliance requirements taking effect in 2014. Congress introduced two new provisions for tax year 2014 that the IRS has to implement: the Patient Protection and Affordable Care Act (PPACA) and the Foreign Account Tax Compliance Act (FATCA). PPACA will figure prominently on many individual returns. Mr. Koskinen noted the premium tax credit and the individual shared responsibility payment or individual mandate to maintain minimum essential health coverage. This will be the first filing season with two major provisions from the Affordable Care Act on Form 1040, which is revised to reflect the premium tax credit and the individual health insurance mandate under PPACA. Implementation of FATCA which affects taxpayers with accounts overseas will also cause trouble this filing season. A new withholding requirement (FATCA withholding) will create extra barriers for taxpayers trying to get refunds back in a timely manner.
Finally, there is some promising news about the 2013 tax filing season. Mr. Koskinen outlined the IRS’s efforts to combat tax identity theft which has been a huge problem since 2010. After criminal investigations, arrests, and sentencing of between 1,200 and 1,500 individuals, plus better refund safeguards, improper payments to identity thieves are now lower, but still pose a significant problem. The IRS is doing a better job than before of correcting victims’ accounts, reducing the time required from a year to under 120 days. Ongoing initiatives to stem the problem include consolidating victim assistance in a single IRS unit and a pilot program offering identity protection personal identification numbers to all taxpayers in regions where identity thieves have operated. The pilot program is available in Georgia, Florida, and the District of Columbia.
Furthermore, the IRS’s longer-term goal of providing online services is to provide services comparable to those offered by financial institutions, which will be a complete online tax filing experience. Taxpayers would have a secured online account where you could logon and review documents the IRS has received and your previous filings, and any issue with your return can be resolved in a shorter period of time. Once more activities are moved online, the impact of annual budget reductions could be reduced. To find out the current available online services, please visit: http://www.irs.gov/Individuals.