The IRS will likely begin accepting income tax returns in the upcoming filing season with “no significant delays,” IRS Commissioner John Koskinen told the AICPA National Tax Conference in Washington on Tuesday.
Return filing can begin “certainly before the end of January,” Koskinen said, although he did not announce an exact date.
The IRS’s ability to start tax season on time partly reflects that the current run-up to tax season, unlike previous ones, is not hampered by uncertainty surrounding the fate of the retroactive extension of expired tax provisions, thanks to the Protecting Americans From Tax Hikes (PATH) Act of 2015 (part of the Consolidated Appropriations Act, 2016, P.L. 114-113).
However, for some taxpayers, Koskinen said, the PATH Act will mean delays in receiving refunds. Due to a change to Sec. 6402(m), starting in 2017, refunds for returns claiming an earned income tax credit or additional child tax credit cannot be issued before Feb. 15. Despite this statutorily mandated delay, Koskinen urged return preparers to submit returns as they usually do, and not hold them until after Feb. 15, because that will only put the returns further back in the queue.
Another new PATH Act change for 2017 requires Forms W-2, Wage and Tax Statement, to be filed with the Social Security Administration by Jan. 31. Those changes are intended to give the IRS a better chance to check returns and prevent improper payments and better protect taxpayers against fraudulent refund claims using stolen identities, Koskinen noted.
Koskinen said he hoped the Service could build on a successful 2016 filing season that saw improved levels of telephone service to taxpayers and practitioners, and progress throughout the year in stopping identity theft fraud. The former, he said, was largely due to an additional $290 million funding appropriation. The IRS’s need for increased funds after years of budget cuts was a constant refrain through Koskinen’s address, and he said it will be his biggest priority in the remaining year of his five-year term as commissioner.
Koskinen touted the work this year of the Security Summit, a cooperative effort by the IRS with representatives of preparers, the tax preparation software industry, financial institutions, and state tax administrators, noting that its work accompanies a drop of more than 50% in filings by taxpayers of Form 14039, Identity Theft Affidavit.
But, he said, thieves may be adapting. Foreign organized crime syndicates have a “stunning” estimated 1 billion stolen online user IDs and passwords with which to “ping” banks for financial account access.
“It’s no longer beanbag we’re playing here,” he said, “but a serious, ongoing battle.” In trying to predict thieves’ strategy, the IRS has grown increasingly concerned about tax preparers’ systems and their vulnerabilities.
“If they can hack into your systems and get the data about your clients, they are better able to file a more effective-looking fraudulent return,” he said; hence the IRS is promoting its “Protect Your Clients; Protect Yourself” campaign.
Another security measure Koskinen promoted for the upcoming filing season is expansion of the use of a 16-digit verification code on Forms W-2 from 2 million last year to 50 million, and he urged practitioners in the audience to enter any such code they encounter into returns. This could help reduce the number of false positives in the millions of suspicious returns the IRS stopped last year.
IRS future state
Koskinen also sought to reassure the audience that the IRS’s Future State initiative would not require taxpayers who do not wish to interact with the IRS online to do so but would allow them to communicate by phone or in person.
Earlier Tuesday, National Taxpayer Advocate Nina Olson described her reservations on that score. Olson said she has observed in recent years that “as the responsibilities of taxpayers have become more and more onerous, the IRS has become more remote.” She identified her top priority going forward as working to encourage a culture of engagement by the IRS with taxpayers and one not as quick to assume taxpayers are not complying with their obligations.
The IRS’s primary goal should be “building trust, not just by creating an online account by which they can look up what they owe,” Olson said.
Koskinen stressed that the Future State is “not some new invention” but part of a natural evolution in recent years of online tools such as “Where’s My Refund?” and online installment agreements—for taxpayers who prefer to deal with the IRS online. And having more taxpayers get their answers online could in turn improve the IRS’s telephone service, as well as allowing for quicker review of returns for errors that taxpayers can correct more expeditiously and simply, he said.
—Paul Bonner (email@example.com) is a Tax Adviser senior editor.