No one looks forward to tax season. Even the people who make money from preparing returns grit their teeth because they know the stretch from January to April 15 will be long and hard. But it could be worse, right?
Actually, it’s about to be, and that comes straight from the officials at the top. Internal Revenue Service Commissioner John Koskinen said that 2015 “will be one of the most complicated filing seasons we’ve ever had,” as the Journal of Accountancy reported.
It’s not that you will own more money, although you might very well. The main driver of the pain will be factors making filing far more complicated than usual. With provisions of the Affordable Care Act that become active, a Congress that likely doesn’t, uncertainty about dozens of tax provisions that are phasing out, other mind-bending aspects coming into force and an IRS that says it doesn’t have the resources to do what it’s obligated to, this is going to be one interesting ride.
Feeling Ill Over ACA Paperwork
Two provisions of the ACA — tax credits for health insurance premiums and individual mandates — will provide two sources of pain. People who haven’t made enough to afford health care may have been eligible for tax credits to offset their increased expenses. The insurance exchanges frequently calculated the likely subsidy and reduced the premiums by the appropriate amount.
Only the calculations were initially made on the previous year’s taxes. Now comes the time to settle up and figure out whether people received the right number of credits — or too few or too many. That means at least an extra form to calculate what the impact should be, and whether people with too little money already may have to send some of it to the IRS because their circumstances improved between 2013 and 2014.
Also on the ACA front is the type of coverage you have. If you do have full coverage, you check a box off on the 1040. If not, there is another form with a “complicated penalty calculation” depending on multiple factors, according to what Mark Luscombe, principal analyst for the tax and accounting group of tax information publisher Wolters Kluwer, told DailyFinance.
Uncertain Tax Regulations
Expiring provisions in the tax code will mean perspiring consumers and professionals. “It’s one of the things is something we seem to face every couple of years,” Luscombe said. “All these regularly expiring provisions have tended to be extended only a couple of years at a time.” This year there are about 60.
Some include the individual deduction for state sales tax, the above-the-line deduction for college tuition and fees, teachers’ out-of-pocket expense deduction and the ability of people over 70½ years to distribute from an individual retirement account directly to a charity so you don’t increase adjusted gross income and see a hit to Social Security income.
Not only could you end up having to pay more, but the longer a bitterly divided Congress delays on making decisions, the more pressure they invariably put on taxpayers and preparers. “The IRS forms are still in draft stage because they’ve reserved these lines, not knowing whether to include them or not,” Luscombe said. Until it’s done and the regulations are set, there are no forms to fill, software can’t correctly run, and preparers won’t be sure how to handle some situations.
Even the IRS’s own software won’t be ready to process returns and issue refunds. According to Luscombe, in 2013, problems with IRS software held up the start of the filing season by a couple of weeks and delayed refunds.
Overtaxed Tax Officials
Starting behind isn’t good for any organizations, including the IRS. Throw in inadequate resources, and it’s worse. Koskinen noted that the IRS has expanded responsibilities with a budget that’s declined by 7 percent since 2010 and a 13,000-person drop in headcount. That means fewer people to get systems ready, fewer people to process returns, fewer people to perform audits and fewer people for everything else.
This year, the IRS was able to answer taxpayer calls only 71 percent of the time. Koskinen thinks that in 2015, the number will probably drop to 53 percent.
As he almost said, things will get ugly. Leave yourself plenty of time to prepare and try to keep a sense of humor. Or maybe have a bottle of aspirin handy.