Tax season is saved! Tax Analysts reports ($link) that the IRS is sitting on “tens of thousands” of returns affected by the Obamacare advance premium tax credit:
Speaking March 2 in Washington at an American Payroll Association event sponsored by Bloomberg BNA, Olson said the returns have been “held for quite a long time, since the beginning of the filing season,” because the IRS is still waiting for matching data from state health insurance exchanges. The returns are being held in suspense and the IRS has instructed its employees not to inform taxpayers why their return is being suspended when the taxpayer contacts the Service, she said.
According to Olson, the Taxpayer Advocate Service will not follow the IRS’s instructions to remain silent on the issue because taxpayers have the right to be informed under the taxpayer bill of rights.
More of Commissioner Koskinen’s famous committment to transparency and disclosure. But all is well, right?
Olson said her office has received days of training on the ACA so her employees are prepared when these cases come in. “I think this is one of the most complicated provisions that we’ve ever inserted into the Internal Revenue Code” and I’m “astonished at the complexity of it,” she said.
“I’m very concerned about the filing season,” Olson said, adding that the federal exchange has already sent erroneous reporting information to 800,000 taxpayers.
Just yesterday the IRS, on the due date for farmer and fisherman returns where no estimated tax was paid, waived estimated tax penalties for such taxpayers where they are still waiting on 1095-A forms from their healthcare exchange. This follows the universal waiver of late payment penalties for amounts owed on the advance premium credit, the waiver of ACA penalties on health insurance premium reimbursement plans, and the last-minute waiver of Form 3115 requirements for smaller businesses under the repair regs. It’s an overwhelmed IRS desperately patching up a failing tax season with duct tape and wire.
Feds extend 1040 deadline to April 15 for farmers awaiting form 1095-A; Iowa extends deadline to April 15 for all farmers. Farmers are eligible for a special deal that lets them not pay estimated taxes, as long as they file and pay the balance due by March 1. The deadline was yesterday because March 1 was on a Sunday this year. As we reported yesterday, the IRS issued a last-minute waiver of the deadline for farmers still awaiting their Form 1095-A from an ACA exchange.
Yesterday Iowa followed suit. The Iowa Department of Revenue sent this to practitioners on its email list (I can’t find a link on the Department website; the emphasis is mine):
The Iowa Department of Revenue has granted an extension to all farmers and commercial fishers to file 2014 Iowa individual income tax returns without underpayment of estimated tax penalty.
If at least 2/3 of their income is from farming or commercial fishing, taxpayers may avoid penalty for underpayment of 2014 estimated tax in one of the following ways:
(1) Pay the estimated tax in one payment on or before January 15, 2015, and file the Iowa income tax return by April 30, or
(2) File the Iowa income tax return and pay the tax due in full on or before March 2, 2015.
The issuance of corrected premium tax credit forms (Form 1095-A) from the Health Insurance Marketplace may affect the ability of many farmers and fishers to file and pay their taxes by the March 2 deadline.
Therefore, any farmers or fishers who miss the March 2 deadline will not be subject to the underpayment of estimated tax penalty if they file and pay their Iowa taxes by April 15, 2015.
The Iowa relief is not limited to farmers awaiting a 1095-A. The slightly tricky thing: non-farmer Iowa 1040s are due April 30, but the new farmer deadline is April 15. Be careful out there.
Related: Paul Neiffer, IRS Has Impeccable Timing (As Usual)
All is well. Tax Analysts reports ($link) Additional Medicare Tax Reporting Is Causing Problems. It quotes Paul Carlino, an IRS branch chief:
Carlino explained that reporting amounts in Form W-2 box 6 that do not equal the 1.45 percent tax on wages has caused confusion among taxpayers, some of whom seek refunds believing their employer withheld an incorrect amount of tax.
Carlino said that another problem is taxpayers who are not having the additional Medicare tax withheld.
The Additional Medicare Tax is unique among federal payroll taxes in that it is computed at separate rates for married and single filers, requiring a reconciliation on the 1040. That can result in underwithholding.
Russ Fox, Don’t Call Us:
When I called today I reached the normal recording, but every time I attempted to obtain help for an individual not in collections (that’s one of the options when calling the PPS) all I got was, “Due to extremely high call volumes that option is not available now. Please try your call again later.”
Well, the IRS has other priorities than your silly tax return, peasant.
TaxGrrrl, Tax Checks Go Up In Flames After Mail Truck Burns. Sums up this tax season.
Robert Wood, Obama Immigration Fix: 4M Illegals Who Never Paid U.S. Tax, Get 3 Years Of Tax Refunds. Only about 25% of EITC payments are made improperly. What could possibly go wrong?
William Perez, Moving Expenses Can Be Tax-Deductible
Peter Reilly, Lois Lerner Out From Under Freedom Path Lawsuit For Now
TaxProf, The IRS Scandal, Day 663, quoting James Taranto from the Wall Street Journal: “So the IRS admittedly denied tax-exempt status improperly to at least 176 groups, tried to apply extralegal restrictions to others, and is still delaying approval for those groups that have gone to court in an effort to vindicate their rights.”
Alan Cole, How to Dismantle an Ugly IRS Worksheet (Tax Policy Blog):
The difficulty of the worksheet is not the fault of the IRS. If anything, the IRS put a very difficult concept into a one-page worksheet. But even with the worksheet’s good design, it’s still 27 lines. That’s because the underlying tax code it deals with is not elegantly designed.
The post goes on to explain how our system of taxing corporation income twice leads to this complexity.
Martin Sullivan, High Hopes for Highway Funding: A Bridge to Nowhere (Tax Analysts Blog). “Congress is talking a lot about long-term solutions to our infrastructure funding problem, but will likely only do another short-term patch.”
Renu Zaretsky asks Can Expectations Be Too Low? In today’s TaxVox headline roundup. (No, by the way.). The post addresses the low IRS audit rate for businesses, the IRS plan to issue retroactive earned income tax credit to beneficiaries of the executive amnesty for illegal immigrants, and the upcoming Supreme Court arguments in King v. Burwell on whether the IRS exceeded its authority in granting ACA credits in states that didn’t set up exchanges under the act.
Career Corner, Here Are Some Coded Phrases You Will Hear During Busy Season (Andrew Argue, Going Concern)