5 things to know about tax filing and Obama's health law
The IRS is cutting taxpayer services just as President Barack Obama's health law is making filing a tax return more complicated.
The agency blames budget cuts enacted by Congress. An IRS watchdog says service problems at the tax agency will make complying with the law harder for well-intentioned taxpayers.
"Without adequate support, many taxpayers will be frustrated, some will make potentially costly mistakes, others will incur higher compliance costs when forced to seek information and assistance from tax professionals," said Nina E. Olson, the National Taxpayer Advocate, an independent office within the IRS.
"Still others," Olson said, "will simply give up and not file."
Olson released her annual report to Congress Wednesday, less than a week before the start of tax filing season on Tuesday.
Five things to know about the tax filing season:
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WHY IS IT GETTING HARDER TO FILE A TAX RETURN?
For the first time, tax filers will have to report information about their health insurance during the previous year. For most people who get health coverage through work or through government programs like Medicaid, it will mean simply checking a box.
Others who got insurance through state and federal marketplaces will have to file a new form, while people who received subsidies will have to provide more detailed information.
People who didn't have health insurance last year face fines unless they qualify for a waiver, which requires more paperwork.
The subsidies were based on projected incomes, so families will need to report if actual incomes were higher or lower. If higher, they might have to pay back some of the subsidy, either through a smaller tax refund or a payment.
If their incomes were lower, they might qualify for a larger tax refund.
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WHY CAN'T THE IRS ANSWER MY QUESTIONS WHEN I CALL?
The tax agency says only half of the 100 million people expected to call this year will be able to reach a person.
Callers who do get through may have to wait on hold for 30 minutes or more to talk to someone who will answer only the simplest questions.
IRS Commissioner John Koskinen says budget cuts are forcing the agency to reduce taxpayer services and other functions.
Congress cut the IRS by $346 million for the budget year that ends Sept. 30. Koskinen says the agency's $10.9 billion budget is its lowest since 2008. When adjusted for inflation, the budget hasn't been this low since 1998, he said.
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WHY DID CONGRESS CUT THE IRS BUDGET?
Republicans in Congress adamantly oppose Obama's health law, so some have been working to starve the IRS of funds just as its role in implementing the law ramps up.
It won't work, Koskinen said in an interview. The agency, he said, is required by law to help implement the health program. "The only places we have discretion are in information technology, tax enforcement, customer service."
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WHERE CAN I GET HELP FILING MY TAX RETURN?
The IRS wants you to visit its website. The agency has devoted a section to answering questions about the health law: www.irs.gov/Affordable-Care-Act/ .
The IRS website includes videos, tax tips and frequently asked questions about the health law.
Koskinen's advice to taxpayers with questions: Don't call the IRS unless you absolutely have to.
More than half of all filers pay someone to prepare their returns. Private tax preparers, such as H&R Block, also have websites with information about the health law.
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WILL IRS BUDGET CUTS REDUCE MY CHANCE OF GETTING AUDITED?
Yes. Last year, the IRS had fewer agents auditing returns than at any time since at least the 1980s. This year the number of agents will be cut again — by about 1,800 agents, Koskinen said.
That will result in at least 46,000 fewer audits of individuals and businesses this year. Less than 1 percent of individuals will have their tax returns audited.
Budget cuts, however, come with a cost: Having fewer enforcement agents will cost the federal government at least $2 billion in lost tax revenue this year, Koskinen estimated.
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