Internal Revenue Service (IRS) officials predicted the 2015 tax season will be a challenging one when they recently discussed a variety of issues related to the coming tax filing season with American Institute of CPAs (AICPA) staff.
It’s the first year for reporting health insurance coverage and related health care subsidies under the Affordable Care Act (ACA) and the first time foreign financial institutions will be required to send bank account information regarding U.S. citizens and permanent residents to the IRS under the Foreign Account Tax Compliance Act (FATCA), both of which will increase demand for services at a time when the IRS faces budgetary constraints. The fact that Congress is unlikely to act until late this year on the more than 50 expired tax extender provisions also will contribute to the difficulty of the 2015 tax filing season.
The IRS officials said, however, that they are planning for the tax filing season to begin at the usual time in January. They also said the IRS hopes to establish more online assistance programs in areas where there is high demand for help, such as the recently implemented Get Transcript and Where’s My Refund? as a way to alleviate the need for telephone assistance.
Here’s a rundown of the AICPA-IRS discussion by topic:
ACA – The IRS expects to release the accompanying draft instructions to draft Forms 1095-A, Health Insurance Marketplace Statement; 1095-B, Health Coverage, and 1095-C, Employer-Provided Health Insurance Offer and Coverage, within the next several weeks. AICPA will be working to secure answers from the IRS to the many questions practitioners have about the new forms.
FATCA – On July 1, U.S. financial institutions and other withholding agents were required to begin withholding 30 percent on withholdable payments made to non-financial foreign entities or non-participating foreign financial institutions that after June 30 do not meet the FATCA reporting requirements.
Extenders – Congress is unlikely to resolve its differences about the more than 50 temporary tax breaks, known as extenders, which expired at the end of 2013 or soon will expire, until the lame duck session after the November elections. The Senate Finance Committee has approved S. 1859, which would generally extend them for one year, but disagreement between Republicans and Democrats in the Senate about potential amendments has stalled the bill. The House is taking a more individual approach and has passed bills that would permanently extend several provisions, including the research and development credit, S corporation benefits, enhanced expensing under section 179 of the Internal Revenue Code and 50 percent bonus depreciation. Late action by Congress can create problems for the IRS, tax practitioners and taxpayers because forms and instructions have to be revised at the last minute, which could result in a delayed start to the tax filing season.
Direct Deposit Limits – The IRS said the new limits effective in January 2015 will restrict to three the number of refunds that can be electronically deposited into a single financial account, such as a checking or savings account, or pre-paid debit card. The fourth and subsequent refunds will convert automatically to a paper refund check and be mailed to the taxpayer. The IRS explained that those refund checks will be cut at the same time the first three refunds are electronically scheduled. Direct deposits will be made only to accounts bearing the taxpayer’s name. The limits on direct deposits will help protect taxpayers by preventing criminals from easily obtaining multiple refunds.
- IRS Visits to Return Preparers – The IRS plans to continue the program in the same format that was used last year. Therefore, 3,750 letters to tax preparers selected to undergo reviews will be mailed in a few weeks; 1,250 visits focused on Schedule C returns are anticipated. The IRS expects to visit tax preparers’ offices before tax season begins. The AICPA will continue work with the IRS to minimize the impact of these visits on CPAs.
The AICPA will work cooperatively with the IRS in the months ahead on these and other issues affecting taxpayers and tax preparers.