IRS Braces for Start of Tax-Filing Season

The Internal Revenue Service is on the verge of kicking off tax season, opening its Free File service on Friday and electronic filing next Tuesday, while dealing with the latest round of budget cuts that promise to further curtail customer service as the IRS prepares for an onslaught of questions related to the Affordable Care Act.

“I want to start by saying I’m delighted that the filing season is opening on schedule,” said IRS commissioner John Koskinen during a conference call with reporters Thursday. “It’s a stunning achievement by our employees, especially those who work in our Wage and Investment Division, information technology, as well as across the agency. Along with normal filing season preparations, there was a lot of extra work to get ready for tax changes relating to the Affordable Care Act, which we’re implementing on the back end for the first time, and the Foreign Account Tax Compliance Act, or FATCA. We also had to update our systems to reflect the passage of the tax extender legislation in December. And of course this has all been done under extremely tight budget constraints.”

Taxpayers will have until Wednesday, April 15 to file their 2014 tax returns and pay any taxes that are due. The IRS anticipates it will receive approximately 150 million individual income tax returns this year. As in each of the past three years, more than four out of five returns are expected to be filed electronically. The IRS is discouraging taxpayers from filing paper-based returns, warning that budget cuts will further delay processing of those returns beyond what normally occurs each year (see IRS Commissioner Warns Tax Refunds Could Be Delayed by Budget Cuts).

“This year, as in the past, the IRS expects to issue 90 percent of refunds in less than 21 days,” said Koskinen. “The best way to ensure a quick refund is to e-file your return. That’s because we expect processing delays for paper returns as a result of our budget constraints. Normally, refunds for paper filers can take four to six weeks, but this year it may take an extra week or more. So if you’ve never e-filed before, this is a great year to consider doing so.”

Koskinen pointed out that it is important for taxpayers to make sure to file a complete and accurate return to avoid further delays. “I understand people wanting to file quickly to get their refund fast, but there could be processing delays for your return if it includes errors or is incomplete,” he cautioned.

“Taxpayers need to wait until they receive information returns such as W-2s or 1099s, so they have the data they need to prepare an accurate return. Plus, this year for the first time, people who must reconcile advance payments of the Premium Tax Credit will need information from the new Form 1095-A that they will receive from the Health Insurance Marketplace. I have a special message for recipients of those advance payments: Please make sure you get your 1095-A before filing. This will allow you to file an accurate return, which is important. Having to file an amended return could lead to extensive processing delays, including delays of refunds, given our budget cuts.”

The IRS is encouraging more taxpayers to take advantage of the Free File options. Those are expected to attract more interest from taxpayers this tax season after Intuit recently raised the price for its consumer tax software, TurboTax, for taxpayers who need to file a Schedule C, D or E for reporting self-employment, investment or rental income, prompting renewed competition from H&R Block in response.

“Free File can be used by anyone who earns $60,000 or less,” said Koskinen. “That’s 70 percent of all taxpayers, or 100 million individuals and families. Last year, 3.2 million returns were filed using Free File, which is a 10-percent increase from the previous year. I should note that Free File is made available through an agreement between the IRS and the 14 companies that form the Free File Alliance. I’m delighted to report that we are in the final stages of a new five-year agreement that will continue the Free File program through the 2020 filing season.”

Koskinen also described the IRS’s readiness for handling the Affordable Care Act. “Most people will only have to check a box on their Form 1040 return to indicate they had health coverage,” he said. “But some filers will be claiming exemptions from coverage, and many others will need to reconcile advance payments of the premium tax credit. Taxpayers with questions can go to our website, IRS.gov, where we have a special page devoted to the ACA. On that page, you’ll find answers to many questions about the tax provisions, as well as links that will take you to online ACA resources of other federal agencies. In particular, if you believe you’re eligible for an exemption, the page explains in detail what it takes to qualify.”

Koskinen is encouraging taxpayers to use the IRS’s Web site to answer their questions as there are expected to be long delays in getting through on the IRS phone lines because of budget cuts at the agency.

“For taxpayers who have questions, or need forms, my advice is to take advantage of all the help we’re offering online,” he said. “There is a wealth of useful information on IRS.gov, including many online tools. For example, ‘Where’s My Refund?’ lets you check the status of your refund. Another tool, IRS Direct Pay, offers a quick, easy and secure way to pay your taxes online. And if you need a copy of a prior year’s tax return, we’ve got a tool for that too, called Get Transcript. But because of severe cuts in our funding, taxpayers need to be aware that other services will be curtailed. That’s especially true for our toll-free help lines. We expect our phones to be extremely busy, and there will frequently be extensive wait times of a half hour or more, so I would caution taxpayers to use our phone lines only as a last resort. If we have more people using the website for what they need, it may ease the crunch on our phone lines, so that the people who really need to get through on the phone have a better chance of doing so.”

Although the IRS has sharply curtailed its free tax preparation services at its Taxpayer Assistance Centers this year, Koskinen noted that there is still free tax preparation help available for low-income taxpayers, older Americans, people with disabilities and those with limited proficiency in English. “The IRS supports more than 12,000 Volunteer Income Tax Assistance and Tax Counseling for the Elderly sites around the country,” he said. “These sites are staffed by more than 90,000 dedicated and trained volunteers, and I’m proud to say that many of them are current IRS employees and IRS retirees.”