The 2015 tax-filing season will likely be the worst in nearly 30 years, according to National Taxpayer Advocate Nina E. Olson, who spoke to tax practitioners on November 3 at the AICPA’s National Tax Conference in Washington, D.C. Olson told attendees that the filing season will be impacted by implementation of the Patient Protection and Affordable Care Act (PPACA) and the Foreign Account Tax Compliance Act. In addition, that cuts in the number of IRS employees providing customer service will also result in long telephone delays for practitioners seeking help for their clients.
Olson suggested that practitioners contact the Taxpayer Advocate Service as soon as they face difficulties during the upcoming filing season. Her office will use complaints to detect ongoing trends and contact the Service for resolution. She said her goal is to inform the IRS if isolated events occurring in different states begin to snowball out of control. Olson added that the Taxpayer Advocate Service is training employees to deal primarily with tax problems arising from the PPACA.
Olson predicted that the 2015 filing season will rival 1985, when thousands of tax returns were lost or destroyed. She added that the Service will only be answering limited tax law questions on the phone and not providing any tax return preparation for low-income taxpayers. “We have just abandoned them near as I can tell, in terms of our taxpayer service to them,” she said.
Olson continued, “I am very concerned about the IRS’ ability to receive accurate information from the (PPACA) exchanges.” She continued, “The IRS will probably get blamed for a lot of things they are not responsible for and that will not play well when they try to make their case on the Hill for additional funding.”
On the issue of voluntary compliance, Olson said studies have shown that when the IRS uses its “brute force” and imposes penalties on taxpayers, then the compliance rate drops for years afterwards. She said penalties erode the ability of taxpayers, especially low-income Americans, to trust that the IRS will treat them right. Staffers who deal with more knowledgeable tax practitioners sometimes resort to saying, “I am the IRS and what I say goes” when they do not have the proper training to understand complex tax issues, Olson stated.
Next year, Olson’s office will seek to win passage of a new taxpayer bill of rights that includes 26 legislative principles. She said legislative changes are required to ensure that the IRS is accountable to taxpayers.
Many taxpayers will be affected if the IRS has to push the filing season back because tax extenders legislation is passed by Congress in late December, according to Olson. “If there are credits that are in the extenders that are reported on [Form] 3800, the business credit form, we can’t finish the programming on that form until we’ve got the extender legislation,” she explained. “So, all of the credits on that form will be impacted. So, even though the law still is in effect for those existing credits, we won’t be able to process those returns because we’re holding up the 3800 form.”