The 2014 filing season opened on January 31 and the IRS’s new Commissioner has emphasized that the agency is focused on making it run smoothly. The agency expects to process more than 140 million individual returns in 2014 and to issue more than 110 million refunds. At the same time, the IRS must balance its customer service and enforcement functions with reduced funding, protect taxpayers from identity theft and more.
Filing season underway
The IRS began processing individual returns on January 31, 10 days later than originally scheduled. The delay was caused by the 16-day government shutdown in October 2013. The IRS needed additional time to reprogram its return processing systems for the filing season. So far, the IRS has not reported any problems or delays with the processing of returns. Unlike the 2013 filing season, there are no additional delays for filers of certain forms.
There are, however, some new forms for the filing season. The IRS has rolled out final Form 8960 for the new 3.8 percent net investment income (NII) tax, which mostly impacts higher income taxpayers. The IRS has also issued final Form 8959 for taxpayers to report the new 0.9 percent Additional Medicare Tax. The Additional Medicare Tax also largely affects higher income individuals.
Taxpayers expecting a refund can track their refund using the IRS’s popular Where’s My Refund? tool. Last filing season, the IRS reported that use of the online tool was so high that it caused some technical problems and delays. The IRS has asked taxpayers to limit their inquiries to once a week. Taxpayers can also check on the status of their refund through the agency’s mobile app: IRS2GO.
On January 17, President Obama signed the Consolidated Appropriations Act of 2014, which funds the federal government, including the IRS, through the end of September. The good news is that there is no longer any possibility of a government shutdown during the filing season. However, the Act decreases IRS funding. The IRS will receive $11.3 billion, which is $526 million below 2013 levels.
New IRS Commissioner John Koskinen has acknowledged the budgetary challenges. Shortly after being sworn-in, Koskinen said that the agency’s budget is its “most intractable problem.” Koskinen cautioned that budget cuts impact not only customer service; they also affect enforcement. Koskinen, who took office in January, is currently visiting IRS offices nationwide to learn first-hand the challenges employees face.
Because of budgetary pressures, the IRS has reduced some taxpayer services. Taxpayers may also encounter delays in trying to contact the IRS. National Taxpayer Advocate Nina Olson recently reported that only 61 percent of calls to IRS customer service representatives were answered in 2013. The average wait time to speak to a customer service representative was 17.6 minutes when a call was answered. Olson added that in 2014, IRS customer service representatives will only answer “basic” tax law questions during filing season and will not answer any tax law questions after April.
Identity theft and scams
The IRS is on heightened alert for identity theft as the filing season unfolds. Typically, identity thieves file fraudulent returns early in the filing season to claim bogus refunds. When taxpayers file their genuine returns, they learn that their identities have been stolen. To prevent return fraud, the IRS has upgraded its return processing filters. These filters flag suspect returns before refunds are issued. Between 2011 and 2013, the IRS reported that its filters flagged 14.6 million suspicious returns and prevented over $50 billion in fraudulent refunds.
Individuals who believe they have been victims of identity theft should immediately alert the IRS. The IRS is assigning special identity protection individual identification numbers (IP PINs) to victims of identity theft. Use of an IP PIN alerts the IRS that the taxpayer is the rightful filer of the return.
The IRS is also warning taxpayers to be on the lookout for telephone and internet scams. Typically, victims are told they owe money to the IRS and must pay immediately using a prepaid debit card or wire transfer. The IRS never contacts taxpayers by email and never demands payment by a prepaid debit card or wire transfer.
If you have any questions about identity theft and ways to protect your personal information, please contact our office. Identity theft is a growing problem. In 2013, the IRS initiated nearly 1,500 identity theft related criminal investigations, an increase of 66 percent over investigations initiated in 2012.
In coming weeks and months, the IRS will update taxpayers on the progress of the filing season and our office will keep you posted. If you have any questions or comments, please contact your Brown Smith Wallace Tax Advisor, or Darla Hemmann, at 314.983.1203 or firstname.lastname@example.org.