The 2015 filing season is well underway and the IRS, taxpayers and tax professionals are expecting some challenges. In addition to the huge number of returns the IRS must process, the agency also must ensure that individuals are in compliance with new requirements under the Affordable Care Act and prevent the growing problem of refund fraud. The IRS has cautioned that its resources this filing season are stretched thin because of budget cuts.
As 2014 drew to a close, there was concern that the filing season would be delayed because of late tax legislation. In past years, the IRS had delayed the start of the filing season in order to reprogram its return processing systems for new tax laws. Congress passed, and President Obama signed, the Tax Increase Prevention Act of 2014 in mid-December. Despite the late date of the new law, the IRS successfully reprogrammed its return processing systems in time for the filing season to open on January 20, 2015.
One important concern as the filing season unfolds is refund fraud. Typically, identity thieves file fraudulent returns early in the filing season. Taxpayers often discover they are victims of identity theft when they attempt to file their legitimate return and learn that a fraudulent return had already been filed. The IRS has upgraded its refund fraud filters and has enhanced its outreach to victims of identity theft. Nonetheless, refund fraud is a growing problem.
Starting this year, the IRS will limit the number of direct deposit refunds to a single financial account or pre-paid debit card to three. Fourth and subsequent valid refunds will convert to paper checks and be mailed to the taxpayer. These measures are intended to help curb refund fraud.
The IRS also is educating taxpayers about telephone scams. Since October 2013, nearly 3,000 individuals have been victims of criminals making unsolicited calls to taxpayers fraudulently claiming to be IRS officials and demanding that they make a cash or credit card payment. The IRS reminded taxpayers that it does not ask for payment by pre-paid debit card or wire transfer.
Affordable Care Act
The Affordable Care Act requires individuals to have minimum essential health coverage – unless exempt – or make a shared responsibility payment. The IRS reminded taxpayers that individuals with employer-provided coverage, or who obtain coverage through Medicare, Medicaid, TRICARE, the ACA Marketplace, and other government programs, generally will only have to check a box on their return indicating they had minimum essential coverage in 2014.
Individuals without minimum essential coverage in 2014 will need to calculate their payment. Before making that calculation, individuals should explore if they are eligible for an exemption. The Affordable Care Act provides for a number of exemptions, some based on economic hardship and others on personal situations.
We will keep you posted of developments this filing season. As always, please contact our Warady & Davis LLP at (847) 267-9600 if you have any questions.