IRS is more intimidating than ever!

Recently released IRS statistics indicate that as of the end of January total filings are down by almost 33% over last year. This is disturbing on two levels:

1. 1. Over time, tax filing behavior is like any other human behavior - when you plot the population on a graph it really doesn't change much. Ok... human behavior ... isn't really subject to change! While many readers may not understand early season filers, they have their reasons. What is keeping them away this year?
2. 2. This is a closed universe! We can predict with great precision how many tax returns will be filed for tax year 2016. The fewer returns being filed early simply means there will be that many more that need to be filed by April 18 this year. (October 16 for extended filers.) Will the resources necessary to help and process those returns be available to serve taxpayers in the constricted time remaining?

Driving the delay seems to be two major factors: the ACA and the PATH Act.

The final provisions of the Affordable Care Act (Obamacare) were implemented for 2016 and include complex reporting and reconciliation processes for those taxpayers taking advantage of the marketplace plans created by the Act. For taxpayers who benefit from the refundable tax credits that make insurance affordable the burden is exacerbated. Based on the reaction of several local early season filers - the avoidance by others is understandable.

The PATH Act was a budgetary "trick" commonly used by Congress to balance a small part of the budget. In this case, IRS funding of certain refundable credits associated with early season taxpayers was deliberately delayed. Not do demean Congress (though it wouldn't be hard) there is also some well intentioned logic behind the noted delay. The individual tax filing (1040) process has increasingly been used as a source of identity theft and fraudsters have targeted the refundable tax credits typically associated with early season filers. By delaying funding, the IRS hopes to limit the access to vulnerable information and funds.

Today, these are observations. As the tax filing season plays out, however, we in the tax preparation industry are bracing ourselves for increasing chaos and confusion as the deadlines loom.