The Internal Revenue Service began accepting individual tax returns on Friday.
The IRS postponed the beginning of tax season this year until January 31 due to the two-week federal government shutdown, which delayed the testing and implementation of some of its computer systems. The IRS is also starting off this tax season with a new commissioner, John Koskinen. Newly approved by Congress, he has been brought in to fix some of the problems that emerged last year, including with the agency’s Exempt Organizations unit, as well as contend with budget cuts that have been reducing taxpayer service.
The IRS is encouraging taxpayers to use electronic filing, noting that last year, nearly 120 million taxpayers opted for IRS e-file. Since 1990, taxpayers have e-filed more than 1 billion Form 1040 series tax returns through e-file.
In addition, the IRS has been getting the word out to taxpayers to take advantage of its Free File program, which it offers through tax software vendors that are members of its the Free File Alliance. Taxpayers were able to start using the Free File software early this tax season starting on January 17, but tax software vendors held back on transmitting the returns to the IRS until the 31st (see IRS Kicks Off Free File Before Tax Season Opens for Preparers).
EITC Awareness Day
The IRS also is marking EITC Awareness Day with the start of tax season, letting taxpayers who are eligible know about the ability to claim the Earned Income Tax Credit. However, tax practitioners need to file a due dilgence checklist for clients who claim the EITC.
“The estimate is that about 20 percent of the people eligible for an EITC refund don’t claim it, partially because eligibility changes for about a third of the people every year,” Koskinen told reporters on a conference call Friday. “They either earn more income or less income. They get married, divorced, separated, or their children move out, so it’s a bit of a complicated issue for people to figure out whether or not they are eligible.”
Due to the IRS’s budget-cutting efforts, taxpayers won’t be able to get their tax returns filled out at the IRS’s walk-in taxpayer assistance centers this tax season, but the IRS is instead encouraging taxpayers to take advantage of the Volunteer Income Tax Assistance program, which is staffed by volunteers like accounting students.
“We have partners across the country, including the VITA Web sites and VITA sites where you can go in and get help with filling out your tax return,” said Koskinen.
Koskinen noted that the IRS is also pointing taxpayers toward Free File. “Everybody making less than $58,000 a year, which is about 100 million Americans, has the ability to select from one of the 14 partners we have there and fill out your tax return for free,” said Koskinen. “With regard to EITC, that tax software will help you to determine whether or not you’re eligible for the credit. Workers who qualify for the EITC must file a federal income tax return, even if their income is below the filing requirement, to get the return. So we’re working hard to make sure that everybody who is eligible gets their return. We’re also working very hard to make sure that everybody not eligible for the credit doesn’t get it. But we encourage everyone who thinks there is a question about it, to either go to our Web site, talk with their preparers, or take advantage of a VITA site, to see if it’s available to them. There’s a lot more information available on IRS.gov, and somewhere on there I’m sure it reminds people that April 15 is only 75 days away.”
Accounting Today asked Koskinen about concerns from tax preparers that filling out the EITC due diligence checklists for clients who claimed the EITC was burdensome and difficult for them to verify with their clients.
“While we understand it takes a little more time than it might for other information, we want the preparers to actually have an obligation to certify that the form they’re filing and the information they are providing to us is accurate,” Koskinen responded. “In fact, a couple of years ago, 70 percent of the EITC claims for refund were filed by preparers, which is why we started working with them. Interestingly enough, the percentage last year of preparer returns dropped somewhat, and that must reflect that some preparers either were unhappy with the burden, or some preparers just didn’t want to get caught filing false returns, which they may have in the past. So while I’m sympathetic with the preparers and we need to streamline it as much as we can, and I’m happy to work with them, but I do think they have the obligation when they file a return, whether it’s EITC or otherwise, to verify that the information is correct. They should not be a pass-through for fraudulent claims.”
Voluntary Tax Preparer Certification
Koskinen was also asked by another reporter about the status of the IRS’s efforts to require mandatory testing and continuing education of tax preparers, which was declared invalid by the courts last year and is currently under appeal. As in a press conference earlier this month, he indicated that he would like the IRS to offer a voluntary program until the requirement is approved (see IRS’s New Commissioner Favors Voluntary Tax Preparer Certification).
“We had a nifty program that then got challenged in court and now is stuck in court,” he responded. “I think what we need to do, while all that is pending, is reach out to tax preparers and provide the same education and training and certification on a voluntary basis as we would have as a requirement. My instinct is that 70 or 80 percent of the preparers want to do the right thing, would be delighted to have the additional education, and would particularly be pleased to have a certificate that they have gone through the program with the IRS, as a marketing device if nothing else. So while I’m disappointed that this has gotten stuck in the courts before I got here, and while obviously it could be remedied by legislation as well, I do think that while we’re in this interim making sure that preparers are as qualified and as competent as possible is in the taxpayers’ interest as well as ours.
“As tax filing day begins, I would encourage everybody to be careful about selection of tax preparers,” he added. “I know the national companies train their people well and they do a very good job, and most individual tax preparers are competent and prepared and have experience. But we have a lot of experience with the minority who are unprepared, unqualified and in some cases dishonest. So people need to be careful when they go to a preparer.”
Affordable Care Act and Taxpayer Call Volumes
The IRS also noted on its home page, for taxpayers concerned about the health insurance filing requirements, if they don't have a tax filing requirement, they don't need to file a 2013 federal tax return to establish future eligibility or to qualify for future financial assistance. But the deadline for signing up for health insurance is March 31, 2014.
Koskinen is concerned about the impact of budget cuts on the IRS’s ability to handle calls about the Affordable Care Act and other tax laws from taxpayers.
“We have 8,000 fewer people now than we had in 2010, yet at the same time we’re trying to do a lot more,” he said. “First of all, there are more taxpayers, if nothing else. But we are charged with statutory implementation of the Foreign Account Tax Compliance Act, fondly known as FATCA, as well as the Affordable Care Act. So we are trying to do more and more with less and less. As I’ve told the Congress, there’s a limit to the level of efficiencies you can have. With regard to people calling in, we are trying to get people as much as we can to use the Web site, which we’re trying to make more user friendly. For instance, we get literally millions of hits on the Where’s My Refund app, and we’re trying to get people to know not to call for the status of their refund but instead go to the Web site.
“This year for the first time you’ll be able to get documents through the Web site,” he added. “You don’t have to call if want a copy of your old tax return. You can verify who you are, go online and get that information directly. So we are going to become more efficient about the calls we take, but that still leaves us with millions of people calling in seeking information about what their tax obligation is, asking specific tax questions.”
Koskinen noted that in fiscal year 2013, when the IRS was also operating under a constrained budget, 40 percent of the people who called didn’t get through. “Some of that is repeat calling, but it’s still a lot of unanswered calls, probably 20 million unanswered calls,” he said. “This year we may be the only agency or one of the few that’s operating at a post-sequester mode. That is, we didn’t get restored to the amount of money we got pre-sequester. It is really an intolerable situation. Even if it’s only 30 percent of the people calling who can’t get through, it certainly is not helping them get the information they need to file their taxes.”