IRS Chief Warns Congress about Possible Delay to Tax Season from Unresolved Tax Extenders

Internal Revenue Service commissioner John Koskinen has written a letter to the leaders of Congress’s main tax committees urging them to decide soon on what to do about extending dozens of expired tax provisions, or else next tax season and the processing of tax refunds could be delayed.

“Making this decision in a timely manner will allow the IRS to implement Congress’s decision without unnecessary disruptions and delays to the upcoming 2015 tax filing season, and it will provide certainty for millions of taxpayers who are affected by the expired provisions,” Koskinen wrote Monday to the leaders of the Senate Finance Committee and the House Ways and Means Committee.

He noted that the IRS’s operational preparations for the 2015 tax season are “in full swing.” The agency has been training its customer service employees, revising tax forms and publications and programming its technology systems to reflect changes in the tax laws. However, the uncertainty over the tax extenders is raising risks, including for tax professionals, Koskinen warned.

“The IRS is currently facing a great deal of uncertainty related to the expired provisions, which raises serious operational and compliance risks,” he wrote. “Continued uncertainty would impose even more stress not only on the IRS, but also on the entire tax community, including tax professionals, software providers and tax volunteers, who are all critical to the successful operation of our nation’s tax system. This uncertainty, if it persists into December or later, could force the IRS to postpone the opening of the 2015 filing season and delay the processing of tax refunds for millions of taxpayers. Moreover, if Congress enacts any policy changes to the existing extenders or adds new provisions, the IRS would have to reprogram systems and make processing changes, which would result in longer delays. If Congress waits until 2015 and then enacts retroactive tax law changes affecting 2014, the operational and compliance challenges would be even more severe—likely resulting in service disruptions, millions of taxpayers needing to file amended returns, and substantially delayed refunds.”

The House has voted to extend several expired tax provisions, such as the research tax credit and bonus depreciation, but the Senate has not yet acted on those bills, opting for a more comprehensive approach that has currently stalled. Congressional leaders have warned that the tax extenders legislation is unlikely to be passed until after the midterm elections in November, possibly during a “lame-duck” session of Congress.

Koskinen asked lawmakers to act sooner. “To avoid these serious problems, I respectfully urge you and other members of Congress to address this issue expeditiously and decide whether or not to extend the expired tax provisions,” he wrote. “I recognize, of course, that it is up to Congress to and the Administration to make this important policy decision. Nonetheless, I would appreciate if you would share with your colleagues that it would be detrimental to the entire 2015 tax filing season and to millions of taxpayers if Congress fails to provide a clear policy direction before the end of November.”

In 2013, the IRS was forced to delay tax season due to the last-minute extension of the so-called Bush tax cuts at the beginning of the year.

Senate Finance Committee chairman Ron Wyden, D-Ore., posted Koskinen’s letter on his committee’s Web site and noted that his committee had passed legislation to extend many of the expired tax breaks. “It has been over six months since the Finance Committee passed the EXPIRE Act with strong bipartisan support,” he said in a statement. “As the 2015 filing season begins to loom large, it is more urgent than ever that Congress moves in a decisive and bipartisan way to renew expired tax provisions that will give taxpayers the certainty they need to plan their finances.

“According to the IRS, the longer Congress delays action the greater risk that the tax filing season and millions of taxpayer refunds will be delayed, among other serious disruptions,” Wyden added. “As the economy begins to show signs of strength, uncertainty from the federal tax code is the last thing American businesses and families need as they look to grow and invest. Congress needs to act swiftly on these important tax provisions so it can get to work on a comprehensive overhaul of the tax code and lift the fog of uncertainty from taxpayers.”