This is shaping up as an ugly tax season. It is not the year to procrastinate. Start gathering your stuff now, and file early and electronically.
Tell me how this makes sense: Congress approved a $10.9 billion budget for the IRS, the lowest level of funding since 2008 and the lowest since 1998 when you factor in inflation, Commissioner John A. Koskinen said in a staff memo.
Officials are anticipating long wait times for the agency’s toll-free help line. Expect to be on hold as long as 30 minutes or more, Koskinen has said. As it happened, 36 percent of phone calls went unanswered by customer service representatives last year, according to a report to Congress by the National Taxpayer Advocate Nina E. Olson.
During a recent news conference, Koskinen was blunt: “I would caution taxpayers to use our phone lines only as a last resort.”
As a taxpayer, here are some of the things that concern me:
-- A reduction in outside contractor support for important projects. “This means that new taxpayer protections against identity theft will be delayed,” Koskinen said. The Taxpayer Advocate Service won’t be able to obtain a new system to oversee taxpayer hardship cases.
-- Fewer audits. Given the size of the federal deficit, you would think collecting as much revenue as possible would be a high priority. Yet the cuts to the IRS will result in fewer individual and business audits. The commissioner said there’s a hiring freeze, resulting in the loss of about 1,800 enforcement personnel. Fewer workers for this year means the IRS will collect $2 billion less in revenue, Koskinen said.
But if you think it’s open season for cheating, think again. “Even with the cuts, we still do 1 million audits. It’s like a roulette spin, and the white ball may fall on your number,” Koskinen warned.
-- Cuts in overtime hours. Sure, if you have less money, you cut back overtime pay. But we all know how complicated the tax code is. Do we really want a situation where people can’t easily get in touch with the IRS or there’s a delay in getting their refunds because staff weren’t allowed to work as long as possible to resolve issues?
Koskinen said taxpayers filing paper tax returns may have to wait an extra week or longer to get a refund. It already takes six to eight weeks to receive a refund if you file a paper return. It’s much shorter if you file electronically and have your refund sent directly to your bank account. Electronic refunds process within 21 days.
Complicating matters is the Affordable Care Act, or ACA. This year, for the first time, some people will have to reconcile subsidies they received to help pay for insurance they signed up for through the health-care exchanges. If you received a tax credit, you’ll need information from IRS Form 1095-A — the Health Insurance Marketplace Statement — which will come from the marketplace. Koskinen said be sure to wait until you get the form before filing. The majority of taxpayers with workplace health insurance or other qualified coverage won’t have to worry because all they have to do is check a box on their return to verify that they have insurance. Because of the ACA, most taxpayers will have to indicate on their returns that each member of their family had qualifying health coverage for year.
If you have questions about the ACA, the IRS has created a special section at IRS.gov/ACA. Look for the section for “individuals and families.”
As Olson sums up in her report: “When the IRS does not answer the calls its taxpayers are making to it, and when it does not timely read and respond to the letters its taxpayers are sending it, the tax system goes into a downward spiral. Taxpayers do not get answers to their questions, so they must either pay for advice they would otherwise obtain for free, or they proceed without any advice at all, leading to future compliance problems.”
Write to Michelle Singletary at The Washington Post, 1150 15th St., N.W., Washington, D.C. 20071 or at email@example.com. Comments or questions may be used in a future column, with the writer’s name, unless otherwise requested. To read more, go to http://wapo.st/michelle-singletary.