R&G Brenner has just been informed by our commercial tax software provider, that the IRS has indicated that the 2015 tax season (for filing tax returns for tax year 2014) will be delayed AT LEAST until January 23, 2015. This means the season could potentially be delayed even beyond 1/23.
While delaying the start of the tax season has become a routine occurrence, this tax season could prove to be especially difficult. The recent spending agreement passed by congress and expected to be signed by President Obama, cuts the IRS Budget down to levels not seen since 1998:
It is a cynical recipe for a self-fulfilling disaster: Give the [IRS] more and more work. Cut its budget. Blame it for failing to do its job. Repeat…For context, in 1998, taxpayers filed about 125 million individual returns. Last year, the agency had to process 145 million.
The IRS Commissioner, John Koskinen, pleaded with members of congress to increase the IRS’ budget and to act quickly on deciding to renew or let multiple tax laws and patches expire…all of which fell upon deaf ears. Mr. Koskinen has now dubbed the 2015 tax season “one of the most complicated filing seasons we’ve ever had” The National Taxpayer Advocate was even more forceful, calling this season “misery” & “the worst filing season ever” for taxpayers.
If there was ever a year to have a tax professional on your financial team, this is it! Contact an R&G Brenner professional today and we’ll help you tackle what is shaping up to be a very difficult tax season.
WASHINGTON — The Internal Revenue Service today announced plans to open the 2014 filing season on Jan. 31…
The new opening date for individuals to file their 2013 tax returns will allow the IRS adequate time to program and test its tax processing systems. The annual process for updating IRS systems saw significant delays in October following the 16-day federal government closure.
“Our teams have been working hard throughout the fall to prepare for the upcoming tax season,” IRS Acting Commissioner Danny Werfel said. “The late January opening gives us enough time to get things right with our programming, testing and systems validation. It’s a complex process, and our bottom-line goal is to provide a smooth filing and refund process for the nation’s taxpayers.”
The government closure meant the IRS had to change the original opening date from Jan. 21 to Jan. 31, 2014. The 2014 date is one day later than the 2013 filing season opening, which started on Jan. 30, 2013, following January tax law changes made by Congress on Jan. 1 under the American Taxpayer Relief Act (ATRA). The extensive set of ATRA tax changes affected many 2012 tax returns, which led to the late January opening.
The IRS noted that several options are available to help taxpayers prepare for the 2014 tax season and get their refunds as easily as possible. New year-end tax planning information has been added to IRS.gov this week.
In addition, many software companies are expected to begin accepting tax returns in January and hold those returns until the IRS systems open on Jan. 31. More details will be available in January.
The IRS cautioned that it will not process any tax returns before Jan. 31, so there is no advantage to filing on paper before the opening date. Taxpayers will receive their tax refunds much faster by using e-file…with the direct deposit option.
The April 15 tax deadline is set by statute and will remain in place. However, the IRS reminds taxpayers that anyone can request an automatic six-month extension to file their tax return. The request is easily done with Form 4868, which can be filed electronically or on paper.
IRS systems, applications and databases must be updated annually to reflect tax law updates, business process changes and programming updates in time for the start of the filing season.
The October closure came during the peak period for preparing IRS systems for the 2014 filing season. Programming, testing and deployment of more than 50 IRS systems is needed to handle processing of nearly 150 million tax returns. Updating these core systems is a complex, year-round process with the majority of the work beginning in the fall of each year.
About 90 percent of IRS operations were closed during the shutdown, with some major work streams closed entirely during this period, putting the IRS nearly three weeks behind its tight timetable for being ready to start the 2014 filing season. There are additional training, programming and testing demands on IRS systems this year in order to provide additional refund fraud and identity theft detection and prevention.
The IRS is accepting 2013 Business Returns (Forms 1120, 1120S, 1065, 1041, 720, 940, 941, 2290) for filing January 13th, 2014.
According to the New York State Department of Finance and Taxation, the remainder of all delayed refunds should be ready by “early August”:
The wait for state tax refunds has progressively grown longer, reaching 12 weeks and beyond this year, said Phillip Goldstein of CPA firm Goldstein Lieberman & Co. in Mahwah, N.J. He blamed the delay on state labor cutbacks.
“They have fewer people working there, which is holding things up,” Goldstein said of the state. “And this isn’t just a New York issue. We’re seeing this in every state across the board.”
Geoffrey Gloak, spokesman for the state Department of Taxation and Finance, cited the inexperience of a new vendor processing the returns, the New York State Industries for the Disabled.
“The tax department is assisting the vendor to both speed processing and provide quality assurance,” according to a statement issued by the department. “Recovery of the department’s costs associated with this effort and interest payments (to taxpayers) is provided for in the contract and will not come at an additional taxpayer expense.”
If you still haven’t received your refund from NY State, hopefully you will soon. Have you received your NY State refund yet? Let us know in the comments section below.
President Obama–through Treasury Secretary Jacob Lew–forced acting IRS commissioner Steven Miller to tender his resignation today following the recent disclosure that the IRS actively and unfairly targeted conservative and Tea Party groups applying for tax exempt status; a gross violation of a government body that is supposed to be above the political fray.
The outrage has now reached a fevered pitch, with the FBI now getting involved with the investigation. While the President and his administration appears to be insulated from the fall out thus far, criminal charges may be forthcoming, with a key person of interest being Lois Lerner who is in charge of the Tax Exempt division of the IRS:
“Lois Lerner lied to me,” said Representative Jim Jordan, Republican of Ohio, who helped initiate the Congressional investigation of the I.R.S.
Ms. Lerner knew of the increased scrutiny given to Tea Party groups since 2010, but told reporters last Friday that she was not aware of any additional scrutiny given to any group and only heard about this through media reports. She along with many other IRS employees are expected to be called in front of congress shortly:
The House Oversight Committee requested five senior I.R.S. officials be made available for interviews by May 20, including the director of rulings and agreements, Holly Paz; a former screening group manager in the exempt-organizations determinations division, John Shafer; and a former advocacy group manager, Joseph Herr.
“Potentially dozens of I.R.S. employees are involved with the original targeting, the failure to correct the problem and the failure to promptly report the truth to Congress and the American people,” said Meghan Snyder, a spokeswoman for Mr. Jordan.
While Mr. Miller–and what is sure to be others–has taken the fall for this scandal, one can’t help but think what involvement if any the previous IRS Commissioner Douglas Shulman had. Mr. Shulman had been commissioner since May 2008, and just recently stepped down last November. He oversaw an aggressive agenda that made some of biggest changes the IRS has seen in decades. While initially lauded, many of these changes have been riddled with delays, errors and met with contempt.
Mr. Shulman was integral in developing and integrating a universal licensing and annual continuing education requirements for professional paid tax preparers. But these requirements were halted by a federal judge right before the 2013 tax season began citing that the IRS did not have the authority to implement these requirements. The IRS appealed part of the decision, but again were overruled. With millions of dollars already spent and industries spawned to provide these paid preparer requirements, it seems like a foregone conclusion that eventually they will go into effect; either by appealing the decision or by going through a body that does have the authority to regulate the industry. Nevertheless, this new scandal will only serve to divert more time & energy away from this project, ultimately leaving the consumer to suffer the most.
Furthermore, Mr. Shulman led the charge in “modernizing” the IRS; particularly the Modernized E-File Program (MeP). With the new MeP, taxpayers would get their refunds in a matter of days, not weeks; all while being kept abreast of their entire filing process with faster updates. The only problem was that it didn’t work. The MeP was put into effect for the 2012 tax season. When it became clear that the MeP was not functioning, it was scrapped, and the IRS was forced to go back to their old E-File program for the remainder of the 2012 tax season. This year (2013) the IRS fully replaced the old program with the MeP, but the tax season was already riddled by delays, due to the last minute fiscal cliff negotiations. At first, the MeP was working as advertised: refunds were being released quicker, and the IRS even claimed you could get updates on refund statuses every 24 hours. But since then its been glitch after glitch, culminating in what has been dubbed the “Education Credit Debacle“, where the IRS allowed hundreds of thousands of tax returns with IRS form 8863 to be filed early causing serious delays. Some of the affected taxpayers could not even get verification that their returns were filed! And the problems haven’t stopped yet. As of the writing of this post, many taxpayers who filed in February & March still have not received their refunds and the IRS is offering no explanation. Last but not least, the new MeP has done next to nothing to combat the explosion of Identity Theft and Fraud that plagued the IRS is recent years.
Once again, it is the hardworking taxpayer that is getting the short end of the stick. If we don’t file our taxes on time, penalties, interest, garnishments, liens, levies, etc. can be and are assessed. But what happens when the IRS does not live up to it’s end of the bargain? As of now, it appears nothing. Supposedly the IRS must pay interest after a certain date if they do not release refunds, but that date is not static. All the IRS has to do (and has done) is send a “document request” like requesting a copy of your W-2s…EVEN THOUGH THE IRS ALREADY HAS ACCESS TO THAT INFORMATION. I have yet to see a taxpayer actually receive interest from the IRS. And the interest rate they supposedly give is far less than what IRS charges us if we are late.
While there is sure to be more to come out from this story, the politicization of it is not good news for anyone. Some politicians have been searching for a scandal ever since Obama took office. So now that they have one, how will it play out to a public so tired of other “scandals”? It’s the “Boy Who Cried Wolf” syndrome. And that is the crux of the problem. While our elected officials have their hearings, while IRS employees start losing their jobs, and the midterm campaign season heats up, average American taxpayers of all stripes, creeds and political affiliations are ultimately the ones that are being ignored.
Do you have an IRS horror story? Share it with us in the comments section.
Acting IRS commissioner Steven Miller recently sat before a congressional panel and hinted that the best way to combat the explosion of tax fraud may be to either delay the tax filing season, or wait to release all refunds until after the filing season concludes on April 15th.
The reasoning goes something like this: The vast majority of fraud involving income taxes occurs early in the filing season (January & February). Delaying the filing season will reduce fraud because a) It gives the IRS a chance to cross reference filed tax data with what employers are required to send to the IRS and b) There will simply be less time to perpetrate fraud and thus less cases. Looking simply at the black & white numbers, yes this would seem like a good idea. However, like the tax code, this is not a black & white issue. Millions of honest taxpayers file their returns as early as possible because they really need the money. These are usually lower-income taxpayers who depend on their refunds to pay bills, rent, and put food on the table. When you consider the money spent for the holiday season, the urgency for these refunds is magnified. Delaying the start of the filing season could seriously put these taxpayers at risk.
Another proposal involves waiting until after April 15th to issue all refunds. That way every tax return can be reviewed and verified before refunds are released, and would virtually eliminate the majority of fraud cases. However, under current IRS regulations, the government would be required to pay taxpayers interest on their delayed refunds. This cost of combating fraud could outweigh the cost of the fraud itself.
Either way, it is very early to speculate proposed changes and whether or not they will be implemented. Nevertheless, if either of these proposals are ultimately implemented in full or in part, it appears the group that will be affected the most will be the lower income taxpayer.
According to a recent article, refunds are being delayed for some lower income taxpayers; especially those that file for the Earned Income Tax Credit (EITC). The primary reason for the delay is these taxpayers tend to file early, and these returns are particularly susceptible to Identity Theft & fraud. Highlights include:
Delays are due to the closer scrutiny the IRS is paying to these returns in an effort to combat fraud/Identity Theft
IRS spokesmen Terry Lemons claims that fewer than 5% of these types of tax returns are being delayed
Wal-Mart has reported that they have cashed $1.7 Billion in refund checks this year so far, compared to about $3 billion in 2012. This significant drop is attributed to the delay in the tax filing season this year.
Over 13 million filers claimed the EITC last year. Using the 5% figure above, that equates to about 650,000 delayed refunds
The IRS is asking taxpayers to provide documentation for children living with them like birth certificates, doctors bills or report cards
Please read the following brief from the IRS. Form 8863 (education credits) will not be accepted by the IRS until Mid-February. An exact date has not yet been offered. Any return that is Electronically filed with Form 8863 before the acceptance date will be rejected. Any return that is mailed to the IRS will not be processed until education credits have been approved. If you would like more information, please contact an R&G Brenner professional toll free (888) APRIL-15, or by clicking here.
Congress might have averted the “fiscal cliff,” but its last-minute action has created some big headaches and questions for tax filers.
“There’s a couple of impacts that I’ve never seen – this is my 44th tax season,” said John Hewitt, founder of Virginia Beach-based Liberty Tax Service and Jackson Hewitt, two of the nation’s largest tax-preparation companies.
Those who want to file a 1040 form electronically – the option favored by more than 90 percent of taxpayers – can’t do that yet because the Internal Revenue Service hasn’t signed off on finalized forms.
“Right now, a 1040 can’t be released,” Hewitt said. “It has a watermark on it saying, ‘Do not file.’ “
Filing paper forms probably won’t be possible until the end of the month, he said.
Taxpayers who like to knock out their federal and state returns together – whether filing themselves or using a tax preparer – face further delays because many of the states that collect income taxes don’t have their forms ready either.
“Typically, as of Jan. 3, we would be ready to go and fully tested in all the states that have income taxes,” Hewitt said in an interview Thursday. “Well, this year, only about a dozen of the states are ready to go because they’ve all been waiting on the federal government to act before they can finalize their forms and tax rates and so forth.”
Virginia will be ready by Monday, Hewitt said.
An IRS spokesman said Thursday that he could not say when new forms would be approved or whether there would be any adjustment of key dates for tax filings.
“Those decisions are under way and should be coming out relatively quickly, so stay tuned,” he said.
New legislation such as the fiscal package just approved by Congress needs to be reviewed, and IRS computer systems need to be configured to adhere to the bill’s provisions, the IRS spokesman said.
“These things don’t happen in a matter of hours; it takes days.”
Months ago, the Internal Revenue Service set Jan. 22 as the start date for the filing of electronically transmitted, computer-generated tax returns – the latest start date since electronic filing began in the late 1980s, Hewitt said.
“Those people that want their money quickly, that want their money in just a couple of weeks, are going to get it a week later than at any time since electronic filing was invented 25 years ago,” he said.
Carolyn Buzek is a Jackson Hewitt franchisee with eight offices in the Hampton Roads area.
“The IRS gets a bum rap in a lot of cases,” she said, adding that “everybody blames them for why you can’t file.”
“Well, it’s really Congress that makes the decisions, and the IRS has to scramble and try to figure out when you have the wording,” Buzek said. “Some of this is getting pretty complicated.”
California-based Intuit, maker of TurboTax, offers both online and desktop products enabling taxpayers to file their own returns. Electronically completed forms are transmitted to the company, which sends them to the IRS when it’s ready to receive them, Ashley McMahon, a spokeswoman, said Thursday.
Both products include prompts instructing users to download updates.
Hewitt said one of the biggest burdens his company will face this year is having to deliver the bad news to some customers that they will be getting their refunds late.
“These are people who live paycheck to paycheck,” he said, adding that they typically get returns averaging about $3,000.
Another burden is internal, affecting the biggest component of Liberty’s workforce – about 100 computer programmers.
Typically, they get information in October from the states with income tax.
“They have from October to January to get ready,” Hewitt said of his company’s programming staff. “Well, now we have only a few weeks to get ready.”
Hewitt said U.S. taxpayers are facing a situation “unheard of in the annals of tax preparation.”
“I don’t think Congress really understood the impact of what’s going to happen with tax filing this season,” he said. “Maybe they didn’t care.”
IRS acting commissioner Steven T. Miller recently sent a letter to a Ranking Member of the House Committee on Ways and Means. In it he states that the Internal Revenue Service’s computer systems are programed to account for a AMT Patch like in years past. However, the AMT is scheduled to expire when the clock strikes midnight tonight. Without an AMT patch, not only would thousands of middle and lower income taxpayers see steep increases in their taxes, the IRS would have to reprogram their computer systems which could take months; delaying the filing season–and thus refunds–until March or beyond! This would be especially devastating to early filers who depend on their early refunds to make ends meet. We can only hope that any Fiscal Cliff agreement includes an AMT patch. Fingers crossed.
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