The IRS is claiming victory as ObamaCare’s first tax filing season appears to be wrapping up with only a few hiccups.
John Koskinen, the agency’s commissioner, said recently that the current filing season has gone “swimmingly” despite the extra burdens of the Affordable Care Act (ACA) and cutbacks to the IRS budget.
“You could have made a lot of money betting last January, 15 months ago, on that result,” Koskinen said at a speech at the National Press Club last week.
“The system has worked flawlessly,” the IRS chief later added. “It's gone smoothly. And everyone seems to be comfortable, preparers and taxpayers, in preparing their returns.”
The IRS itself has been under fire for the better part of two years, after the agency acknowledged singling out Tea Party groups seeking tax-exempt status. Congressional Republicans have only sharpened their oversight of the tax agency during that time span, which served to raise the stakes for the IRS on ObamaCare.
But both the tax agency and tax preparers say that they’ve been able to capitalize on the years of preparation time since Obama signed his signature healthcare law in 2010.
H&R Block, for instance, was running advertisements on ObamaCare all the way back in 2013 — at least in part because the tax preparation giant didn’t want to get blamed if its customers no longer got a refund because of the Affordable Care Act.
“It's amazing what the IRS can do when it's given that time,” said Nina Olson, the national taxpayer advocate, at a Brookings Institution event this week.
Olson, an in-house IRS watchdog, added that there’s definitely been “glitches” this tax season. But she said the agency hasn’t had the sort of problems it did with programs like the first-time homebuyer credit, for which it had far less preparation time.
The most notable of the problems this filing season was when the Obama administration sent out hundreds of thousands of forms that gave taxpayers incorrect information about how much of a subsidy they received to help pay for insurance. The Department of Health and Human Services was more to blame for that mishap than the IRS.
Preparers do say that many taxpayers were undoubtedly caught by surprise this year, finding that they owed the Treasury once they reconciled the amount of credit they received with an earlier estimate for their 2014 income. For this filing season, taxpayers without health insurance owe either $95 or 1 percent of their taxable income — whichever amount is highest.
Kristin Esposito of the American Institute of Certified Public Accountants also knocked the IRS for consistently being late in circulating ObamaCare-related tax forms, which she said had made it difficult to make taxpayers aware of their healthcare requirements.
Still, she added: “None of these are catastrophic.”
“A lot of things could have gone wrong. A lot of things have gone wrong, but they have not been large-scale things,” said Esposito. “It is fair to say it’s not been a horrible year for ACA.”
The IRS has had to implement other key initiatives this filing season, including a law cracking down on offshore tax evaders.
But Koskinen says that a major reason that the ObamaCare requirements have caused few problems is that roughly four in five taxpayers only have to check a box telling the IRS that they have insurance.
The IRS chief has long called on Congress to simplify the tax code. But he also noted at the National Press Club last week that roughly nine in 10 taxpayers used software to fill out their tax forms — making it easier to integrate ObamaCare requirements without much difficulty.
From a technical standpoint, David Williams, the chief tax officer at Intuit, which makes TurboTax, said the ability to get ACA systems in order illustrated that the IRS is more agile when it comes to technology than it might seem.
“The predictions of cataclysm that were in every discussion about ACA right up until the filing season vanished when you realize that the IRS had figured out most of the major problems and dealt with them,” Williams, himself a former IRS official, said at the Brookings event.
Still, while Koskinen and IRS officials are proud of the agency’s performance this filing season, they’re also loath to compliment themselves too loudly.
Koskinen, if anything, has only intensified his push to increase IRS funding, which has fallen roughly $1.2 billion over the last five years. IRS officials maintain those cuts have led to “abysmal” customer service, with only two in five taxpayers getting through on the phone and frustrations at IRS walk-in centers mounting to the point that the police have had to be called, according to union officials.
Because of those episodes, the IRS has sought to trumpet its work on the filing season, while also remaining sympathetic to the taxpayers it has been unable to help navigate it.
“Continuing budget reductions have meant unacceptably long wait times for taxpayers trying to get assistance over the phone or in person,” the agency said in a statement.
Both IRS officials and tax preparers say they expect the first ObamaCare tax season to be the hardest. But Esposito, of the CPA association, noted that next year’s tax filing period would have its own challenges, as the IRS and preparers deal for the first time with the employer mandate.
“There’s another half to go,” Esposito said.