2013 filing season moves ahead, late-legislation delays expected to end soon
The IRS expects to process more than 140 million individual returns this filing season and for many taxpayers the process has been moving along without any significant problems. A large number of taxpayers, however, have experienced delays in filing their returns because of late tax legislation. The IRS has predicted that all remaining delays should end by early March. One wrinkle may be mandatory across-the-board spending cuts, scheduled, at this time, to take effect after February 28, which could slow the processing of returns. At the same time, the IRS is redoubling its efforts to crackdown on fraudulent refunds and identity theft.
Whenever Congress passes tax legislation late in the year, the IRS has to scramble to reprogram its processing systems to reflect changes to the tax laws. This year was no different. Congress passed the American Taxpayer Relief Act of 2012 on January 1, 2013 and President Obama signed it into law on January 2, 2013. ATRA made changes to numerous portions of the Tax Code.
Fortunately, the IRS had anticipated some of the changes, such as a permanent extension of the alternative minimum tax (AMT) relief and an extension of the $1,000 child tax credit, so the agency left its core processing systems unchanged for these provisions. As a result, the IRS reported that 80 percent of individuals were able to file when the 2013 filing season officially opened on January 30. However, that left 20 percent of individuals unable to file on January 30 because the IRS needed more time to reprogram its processing systems for many ATRA-affected forms.
For business taxpayers, the filing season generally opened on February 4. The February 4 opening covered non-1040 series business returns for calendar year 2012, including Form 1120 filed by corporations, Form 1120S filed by S corporations, Form 1065 filed by partnerships, Form 990 filed by exempt organizations and most users of Form 720, Quarterly Excise Tax Return. Business taxpayers filing many ATRA-affected forms have experienced delays similar to individual taxpayers.
Since January 30, the IRS has been making progress in reprogramming its processing systems for the remaining ATRA-affected forms. In mid-February, the IRS began accepting returns from taxpayers filing Form 8863, Education Credits, (including the popular American Opportunity Tax Credit and Lifetime Learning credit) and taxpayers filing Form 4562, Depreciation and Amortization. Taxpayers claiming the student loan interest deduction or the higher education tuition deduction did not experience a delay.
The IRS anticipates that it will begin accepting the remaining forms in early March. Included in this group are taxpayers filing Forms 3800, General Business Credits: Form 5695, Residential Energy Credit; and Form 5884, Work Opportunity Tax Credit. If there is any further delay, our office will alert you.
The IRS gave special penalty relief to farmers and fishermen because of late legislation. The IRS will waive the estimated tax penalty for farmers and fishermen who did not meet the March 1 deadline for filing and paying taxes. Some tax professional associations have asked the IRS to consider penalty relief for other groups of taxpayers because of the delay in filing the ATRA-affected forms. The IRS has not announced any additional penalty relief but it could. Our office will keep you posted of developments.
The IRS’s popular online Where’s My Refund? tool has been overwhelmed by a large number of requests, the agency reported. To avoid service disruptions, the IRS asked taxpayers to only check on the status of their refunds once a day, preferably weekday evenings or on weekends. The IRS is currently predicting that nine out of 10 taxpayers who file their returns electronically and who opt for direct deposit should receive their refunds within 21 days. That timeframe could change depending on the IRS’s workload and the possible impact of across-the-board budget cuts scheduled to take effect after February 28.
Sequestration is the official term for mandatory budget cuts to most federal government operations, including the IRS. Very generally, the spending reductions are to be made equally from defense spending and from all other federal spending (with some programs, such as Medicare excluded). The reductions required in each of these categories are then divided proportionally between discretionary spending and mandatory spending.
ATRA delayed the start of sequestration until March 1. President Obama and Senate Democrats have proposed a package of spending cuts and revenue raisers. The House GOP has rejected previous proposals for revenue raisers, insisting that deficit reduction be accomplished through spending cuts. At press time, negotiations continue.
The IRS will remain open after February 28. However, some of its operations could be impacted if a deal is not reached. The IRS is expected to concentrate its resources on tax administration, including the processing of returns, and tax enforcement. The IRS has released very few details about its plans for sequestration. Our office will keep you posted.
Along with processing returns, the IRS is combating the growing problem of identity theft. Criminals use stolen identities to file fraudulent returns and claim refunds. Typically, this occurs early in the filing season. An unsuspecting taxpayer is often unaware that his or her identity had been stolen until he or she files a legitimate return and it is rejected. In fiscal year (FY) 2012, the IRS reported that it prevented the issuance of more than $20 billion in fraudulent refunds.
The IRS has designed new identity theft filters to flag false returns before they are processed. The IRS has also issued more than 700,000 identity protection personal identification numbers (IP PINs) to taxpayers who have been victims of identity theft. In January, the IRS launched a nationwide crackdown on identity theft suspects. The IRS reported that the coast-to-coast effort against 389 identity theft suspects led to 734 enforcement actions, including indictments, informations, complaints and arrests.
If you have any questions about the 2013 filing season, please contact our office.
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.