The IRS commissioner said Thursday that he didn’t expect taxpayers to have much trouble dealing with new ObamaCare requirements this year, even as the agency struggles through another funding cut.
{mosads}John Koskinen, the IRS chief, said that he expected some growing pains, given that 2015 is the first year that both his agency and taxpayers will have to deal with a host of new requirements.
But Koskinen insisted that taxpayers already have to tackle questions similar to the healthcare law requirements — and that the agency will go out of its way to ensure that people have all the information they need to be compliant.
“I don’t expect an upswing, a big sudden increase, of people with compliance problems,” Koskinen told reporters at an event previewing the upcoming filing season, which starts Tuesday.
Still, the commissioner also noted that the IRS’s budget problems — the agency just absorbed another $346 million cut — would make it more difficult to enforce Affordable Care Act requirements. Plus, taxpayers looking for answers about how to comply with the law will face long wait times on the phone, the IRS chief noted.
“It’s the first year for everybody, including us,” Koskinen said.
Tax practitioners aren’t nearly as optimistic as the IRS, noting that the healthcare law includes more far-reaching changes than other recent tax policy updates. The tax preparer H&R Block has already launched a national campaign in an effort to prepare taxpayers.
Koskinen noted Thursday that the vast majority of taxpayers — roughly eight in 10 — would see few changes in their filing process. Those taxpayers will generally just have to check a box confirming that they have insurance.
But other taxpayers will have to reconcile the tax credits they received to help pay for insurance coverage in 2014, which were based on an earlier estimate of taxpayer income.
Still others will pay the fine for going without coverage, which for this year amounts to the higher of $95 or 1 percent of a taxpayer’s income.
Troy Lewis of the American Institute of Certified Public Accountants said that one of the worries for tax preparers is the kind of taxpayer affected by the Affordable Care Act requirements. The most recent changes for the filing season, like a new surtax on capital gains income last year, mostly affected wealthier taxpayers, Lewis said.
“They’ve never had to do much beyond input a W-2 and take a standard deduction,” Lewis said about many of the taxpayers affected by the healthcare requirements.
Taxpayers, Lewis added, still aren’t particularly well educated on the ACA requirements, and the IRS was late circulating forms for the healthcare law. That means those who received the credit for health insurance last year based on out-of-date income reporting could be in for some “sticker shock,” Lewis said.
“You’re going to have well-meaning, relatively informed taxpayers saying: ‘What do you mean I owe?’ ” said Lewis, a Utah CPA who heads up the accountant group’s tax committee.
Koskinen did warn taxpayers who got coverage through the health insurance marketplaces to make sure they had received the new form, the 1095-A, detailing the amount of subsidies received before filing. Taxpayers should receive those forms by early next month, Koskinen said.
But the IRS commissioner also argued that reconciling the subsidy amount with a taxpayer’s income wasn’t that different than the exemptions that millions of employees already take on their tax forms.
“It’s not unique to the Affordable Care Act,” he said.
Because of the recent budget cuts, IRS customer service representatives are only answering the most basic of questions from taxpayers during the filing season.
The IRS funding level, currently $10.9 billion, is now down more than 10 percent since 2010. IRS officials say that customer service lines will only be able to answer, at best, around half of the millions of phone calls they receive.
Those that do get through, the agency says, could easily have to wait half an hour to talk to somebody. The IRS also will be looking to avoid paying overtime this filing season, meaning some returns will take longer to process.
But while Koskinen labeled questions stemming from the ACA as “straightforward,” he also said that IRS operators will seek to answer every question about the healthcare law this first year. The agency also has a range of questions answered on its website, and a special automated process specifically for healthcare calls.
The IRS’s most recent funding cut also means that the agency will conduct fewer audits, including on ACA matters. But Koskinen insisted that the IRS will seek to enforce the healthcare issue like they do any other tax issue, and will follow up with some taxpayers who claim they have insurance.
Still, Koskinen added that the tax credit for coverage often goes directly to the insurance company — giving taxpayers less motivation to try to pull one over on the IRS.
“The incentives to try to cut corners are not there, because you’re not able to say I want that whole check,” he said.
Lewis of the CPA group agreed with Koskinen that the IRS’s first year enforcing the law would almost certainly be the toughest, and that the process will improve starting next year. The Obama administration, he said, had done as good a job as it could educating taxpayers.
But he also said that he believed there would be plenty of unforeseen problems that, despite Koskinen’s optimism, the IRS is likely not even be aware of yet.
“I just don’t think the average person knows much about it, plus you combine that with the issues with enforcement,” Lewis said. “It’s going to be painful for some folks.”