The 2015 filing season is now underway and the IRS, taxpayers and tax professionals are expecting some challenges. In addition to the huge number of returns the IRS must process, the agency also must ensure that individuals are in compliance with new requirements under the Affordable Care Act and prevent the growing problem of refund fraud. The IRS has cautioned that its resources this filing season are stretched thin because of budget cuts.

Filing season

As 2014 drew to a close, there was concern that the filing season would be delayed because of late tax legislation. In past years, the IRS had delayed the start of the filing season in order to reprogram its return processing systems for new tax laws. Congress passed, and President Obama signed, the Tax Increase Prevention Act of 2014 in mid-December. Despite the late date of the new law, the IRS successfully reprogrammed its return processing systems in time for the filing season to open on January 20, 2015.

The IRS anticipates receiving nearly 150 million individual income tax returns in 2015. More than two out of three returns will be filed electronically. The IRS also reported that most refunds will be processed within 21 days but there will be exceptions. Individuals who file paper returns typically wait longer for refunds.

IRS budget

For fiscal year (FY) 2015, the IRS’s budget is $326 million less than FY 2014. IRS Commissioner John Koskinen has said that the $326 million reduction will negatively impact taxpayer services during filing season. While IRS telephone assistors will be available to answer questions, taxpayers should expect lengthy wait times, Koskinen cautioned. Wait times could exceed 30 minutes. Koskinen encouraged taxpayers to use online tools, such as Where’s My Refund?, before calling the IRS. The IRS also has highlighted the work of tax professionals and the assistance they give to taxpayers.

Affordable Care Act

The Affordable Care Act requires individuals to have minimum essential health coverage – unless exempt – or make a shared responsibility payment. The IRS reminded taxpayers that individuals with employer-provided coverage, or who obtain coverage through Medicare, Medicaid, TRICARE, the ACA Marketplace, and other government programs, generally will only have to check a box on their return indicating they had minimum essential coverage in 2014.

Individuals without minimum essential coverage in 2014 will need to calculate their payment. Before making that calculation, individuals should explore if they are eligible for an exemption. The Affordable Care Act provides for a number of exemptions, some based on economic hardship and others on personal situations. Our office can help you navigate the exemptions, see if you qualify for one, and if you do not, how to calculate the shared responsibility payment.

Identity theft

One important concern as the filing season unfolds is refund fraud. Typically, identity thieves file fraudulent returns early in the filing season. Taxpayers often discover they are victims of identity theft when they attempt to file their legitimate return and learn that a fraudulent return had already been filed. The IRS has upgraded its refund fraud filters and has enhanced its outreach to victims of identity theft. Nonetheless, refund fraud is a growing problem.

Starting this year, the IRS will limit the number of direct deposit refunds to a single financial account or pre-paid debit card to three. Fourth and subsequent valid refunds will convert to paper checks and be mailed to the taxpayer. These measures are intended to help curb refund fraud.

The IRS also is educating taxpayers about telephone scams. Since October 2013, nearly 3,000 individuals have been victims of criminals making unsolicited calls to taxpayers fraudulently claiming to be IRS officials and demanding that they make a cash or credit card payment. The IRS reminded taxpayers that it does not ask for payment by pre-paid debit card or wire transfer.

Our office will keep you posted of developments this filing season. As always, please contact our office if you have any questions.

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Content provided by CCH. If and only to the extent that this publication contains contributions from tax professionals who are subject to the rules of professional conduct set forth in Circular 230, as promulgated by the United States Department of the Treasury, the publisher, on behalf of those contributors, hereby states that any U.S. federal tax advice that is contained in such contributions was not intended or written to be used by any taxpayer for the purpose of avoiding penalties that may be imposed on the taxpayer by the Internal Revenue Service, and it cannot be used by any taxpayer for such purpose.