Wednesday, December 30, 2015


Before it began the 2015 tax filing season, my 44th season as a paid tax preparer, was expected to be the worst tax season ever, at least by IRS leadership.

The filing season is going to be the worst filing season since I’ve been the National Taxpayer Advocate,” said Nina Olsen.  And IRS Commissioner John Koskinen predicted that the 2015 tax filing season “will be one of the most complicated filing seasons we’ve ever had.”

As it turned out, at least for me, the tax filing season was no worse, or better, than any other.

The idiots in Congress had once again waited until the last minute to extend the “tax extenders” for 2014 returns.  However, for the past 40+ years the tax season has always started for me on the first of February, so the late passage of the extenders did not delay the filing season for me.    

As a result of Obamacare taxpayers had to indicate on their 2014 Form 1040 (or 1040A) whether or not they had “adequate” health insurance coverage, and could be subject to a penalty if they did not.  And taxpayers who acquired insurance through the Obamacare Marketplace and received an “advance premium credit” to help pay for their insurance during 2014 had to calculate the correct amount of the credit to which they were entitled as part of the filing of their tax return and reconcile the actual credit to the advance credit.

For the most part I was able to tell whether or not my clients had health insurance coverage without even asking the question.  I could tell from the DD entry in Box 12 of Form W-2, or a reference to Section 125 pre-tax health insurance coverage in Box 14.  Or the deduction for Medicare Part B premiums identified on Form SSA-1099.  Or the amount of the “above-the-line” self-employed health insurance deduction listed on the worksheet of a Schedule C filer.  For the very few clients where the above did not apply all I had to do was ask.  I had no legal or ethical responsibility to personally verify a client’s coverage.  A simple yes or no answer was enough.

I only had a handful of clients who did not have the required coverage, and most were able to avoid the penalty via the “unaffordable” exemption.  Only two clients had to actually pay a penalty.  And only three clients had received an advance premium credit (one a GDE).  The two that I did during the season initially received erroneous 1095-As (it was announced that 800,000 erroneous Form 1095-As were mailed out).  Both eventually received a corrected form one during the filing season and the other not until the fall.  I prepared the second return with the incorrect information so as not to hold up the client’s refund.  When the correction arrived no amended return was necessary.

Other than the two Obamacare items there was really nothing new for 2014 returns to deal with.

The idiots in Congress had cut the IRS budget, despite forcing new Obamacare responsibilities on the Service, and, of course, taxpayer service took the hardest hit.   As a result I heard from more clients about excessively delayed federal refunds during the 2015 filing season than in all my seasons in “the business” combined.      

A client, a widower who was filing his 2014 return as a Single taxpayer for the first time after the passing of his wife in 2013, sent his 1040 to the IRS on Feb.7th requesting a refund.  No refund ever came.  Finally on April 25th he received a letter from the IRS saying that they had received the return but were unable to process the refund.  The letter explained –

"Our records indicate that the person identified as the primary taxpayer or spouse on the tax return was deceased prior to the tax year shown on the tax form. Our records are based on the information received from the Social Security Administration. Based on this information, the tax account for the individual has been locked.”

The IRS was writing to the taxpayer to tell him that he is dead and so they were not going to process his refund.  He went through all the hoops required by the IRS, including going to the Social Security Administration to get a letter affirming that he was indeed still alive, and finally got his refund on Halloween.

I also heard that the IRS had held up the refund of a client’s unmarried college student son because an injured spouse form was attached to the son’s documents and his return was forwarded to the department that processes injured spouse claims.  Where the injured spouse form came from is anyone's guess.  Certainly not from me or the taxpayer.  The refund was finally received in late May.

It seemed that the initial Consolidated 1099 Tax Reporting Statements from brokerage houses were mailed out later than usual this year – with some houses totally ignoring the February 17th deadline – and the sometimes multiple corrected 1099s also arrived later.  I was notified by a client’s broker of corrected 1099 statements for two accounts on March 24th, literally the day after I had hand-delivered the finished 1040 to the client, with news of another corrected form for the same account a week later. 

While NJ state tax law did not change, I now had to attach a signed NJ-1040-O “opt-out” form to all manually prepared NJ-1040s, as well as keep signed copies on file.  I do not use flawed and expensive tax preparation software, and never will, so I cannot submit all NJ returns electronically.  Whenever possible, and unless the client specifically opts out, I use the NJWebFile system, which allows me to submit NJ-1040s directly to the Division of Taxation online, but this system has many limitations, and I am often forced to submit manual returns.  I was pleased to learn that the ability to claim excess Family Leave Insurance contributions was finally added to the NJWebFile system, allowing me to use it for more returns this season.

The Treasury Department introduced the new “myRA” retirement account with little fanfare in April.  BO first talked about a myRA payroll withholding starter retirement account for employees without access to a 401(k) plan in the January 2014 State of the Union address.  A CNBC article explained the new account –

People can open the accounts with just $25 and can contribute as little as $5 per paycheck through direct deposit. After-tax dollars are contributed to the account, which is set up as a Roth IRA, and the principal and interest earned can be withdrawn at any time without tax or penalty.

Participants can accumulate a maximum of $15,000 in the account, at which point it would be rolled over into a private-sector Roth IRA. If they haven't reached that threshold after 30 years, the account would also be rolled into a private account.”  

The investment in a myRA is backed by the United States Treasury and the account carries no risk of losing money.  Contributions are invested in the Thrift Savings Plan Government Securities Investment Fund (aka the “G” fund), which had an average annual return of 3.19% over the ten-year period ending December.  More information on the myRA is available at   

Identity theft became a big tax issue in 2015.  Thankfully none of my clients were victims of identity theft (as far as I know).  Accounting Today discussed this issue in a year-end review of the top accounting stories of 2015 –

Some tax preparers reported that as many as 1 in 4 of their clients were the victim of tax-related ID theft last tax season, and in June the IRS reported that its Get Transcript function had been hacked, putting the data of over 200,000 taxpayers at risk. The IRS, tax software companies, payroll processes and other stakeholders came together on a number of initiatives they hope will make things more secure in 2016.”

Rep. Paul Ryan was officially elected as the 54th Speaker of the House at the end of October, replacing retiring John Boehner.  Ryan, the 2012 Republican Vice-Presidential candidate, had previously chaired the House Ways and Means Committee, and had been an ardent advocate of rewriting the Tax Code.  Ryan’s election was considered to be big boost for tax reform.

The main news story of 2015 was the Presidential campaign.  Fool Donald Trump’s entry into the crowded Republican race was initially greeted with unanimous cheers from comics and joke writers across the country.  His participation soon turned the Presidential campaign into a three-ring circus.  But with his early and continued leadership in the polls, and his constant racist, anti-feminine, and other ridiculous rants, it soon became no longer funny – and quickly turned into, as I have said often during the year, the most disturbing political development in my lifetime (I turned 62 this fall).  The fact that so many people support the narcissistic clown for President is a truly sad commentary on the intelligence and maturity of the American public. 

While many of the Republican candidates call for serious and substantive tax reform - candidate Ron Paul promised to “blow-up” the Tax Code and released a video of himself eviscerating a copy of the Code with a chainsaw - the Democrat hopefuls continue to call for adding more complexity to the convoluted “mucking fess” of the Code, and more incorrect and improper use of the Code to deliver federal welfare and other social benefits.  

The IRS voluntary Annual Filing Season Program (AFSP) continued with poor response.  As of December 1, 2015, only 44,622 individuals had received a “Record of Completion”.  This is only a bit more than 10% of the total “previously unenrolled” PTIN-holders.

As I reported last year, the American Institute for Certified Public Accountants (AICPA) filed a lawsuit in July 2014 challenging the AFSP program in court and the District Court for the District of Columbia ruled that the AICPA did not have standing to sue.  The AICPA appealed that ruling and on Halloween the Court of Appeals for the District of Columbia ruled that the lower court was wrong, and the AICPA did have standing and the lawsuit can move forward.

The AICPA fears that any government, or other, credential or designation that identifies a person’s competence and currency in 1040 preparation will take business away from CPAs, as it will and as it should, and so they attempt to block any new tax-related credential and sabotage existing credentials like the “EA”.  But EAs and qualified currently unenrolled preparers should be able to more effectively compete with the totally untrue urban tax myth that CPAs are automatically 1040 experts.  
New York State added a 4 hour CPE requirement, in addition to the annual $100 fee, for experienced registered tax preparers, offered free online by the Department of Taxation and Finance.  However the federal and state updates were for tax year 2014 and not 2015, and it included redundant ethics preaching, so the entire 4 hours was a total waste of time for me.

Despite all the talk about tax reform these past couple of years, the idiots in Congress did nothing along these lines during 2015.  The lyrics from the Broadway musical 1776 were once again relevant - “piddle, twiddle, and resolve – not one damn thing do we solve”. 

They did pass some administrative tax changes, usually tacked onto unrelated legislation.  The due dates for some tax returns were changed effective for years beginning after December 31, 2015 via the “Surface Transportation and Veterans Health Care Choice Improvement Act of 2015” –

* Partnership Form 1041s are due March 15 (previously April 15).  For fiscal year partnerships the return is due on the 15th day of the third month following the close of your tax year.

* C corporation Form 1120s are due April 15 (previously March 15).  For fiscal year corporations the return is due on the 15th day of the fourth month following the close of the tax year.  However C corporations with tax years ending on June 30 will continue to have a due date of September 15 until 2025. For years beginning after 2025, the due date for these returns will be October 15.
* FinCEN Form 114s (known as the “Foreign Bank Account Report” or “FBAR” – not to be confused with “FUBAR”, which is a technical term for the US Tax Code) are due April 15 (previously June 30th), but you can get a six-month extension (not previously permitted).

And the “Bipartisan Congressional Trade Priorities and Accountability Act of 2015” included a change in the documentation of education tax benefits beginning with tax year 2016.  As explained at the time by fellow tax blogger Kay Bell, the yellow rose of taxes, in her blog DON’T MESS WITH TAXES -

Under the new trade preferences act, 1098-T information will have to match up with American Opportunity or Lifetime Learning tax credits claims.

Similarly, a Form 1098-T {Tuition Statement – rdf}  will be required to claim the above-the-line tuition and fees deduction, which actually expired at the end of 2014, but is expected to be renewed under pending extenders legislation.

Basically, if you don't have a valid 1098-T with the info you're putting on your return, the IRS will not accept your education claims. This effectively means that folks claiming education tax breaks will have to wait to file until they (and the IRS) get their Form 1098-T copies, delaying filing by folks who submit their returns early because they're getting big refunds.”

However, at the end of 2015, as we in the tax profession engaged in our now annual year-end tradition of watching the calendar waiting for the idiots in Congress to extend the “tax extenders” again at the very last minute, we were genuinely shocked when, in a truly rare exhibition of cooperation, the idiots actually made many of the more popular, and less controversial, of the extenders permanent!  And those that were not made permanent were extended at least through the end of 2016.  

The Protecting Americans from Tax Hikes Act of 2015, aka the PATH Act, quickly passed both the House and the Senate and was signed into law by BO on Friday, December 18th, before everyone in Washington left for Christmas vacation.  So for tax year 2016 everything will be back to what used to be normal years ago – making life easier again for year-round tax planning and for the Internal Revenue Service.

The PATH Act also made permanent some enhanced tax benefits, all involving refundable credits, that were scheduled to expire within the next few years, and did one thing that will truly be helpful to tax preparers, fixing a problem that I have been complaining about for several years now.

Educational institutions are required to report only qualified tuition and related expenses actually paid, rather than choosing between amounts paid and amounts billed as is currently allowed (most institutions historically report only amounts billed), on Form 1098-T, beginning with calendar year 2016.  So, beginning with forms for tax year 2016 issued in January of 2017, the Form 1098-T students receive from colleges will actually provide important and needed information, and will no longer be as useful as “tits on a bull”.

So, while they are still idiots, the members of Congress actually did something “unidiotic” for a change.  Will this be a sign of things to come?  Will the idiots in Congress actually address serious and substantive tax reform in 2016?  I doubt it very much - but I can dream, can’t I.

So that is the year in taxes 2015.  Fellow tax pros - did I forget anything?

BTW – I will be celebrating New Year’s Eve Day tomorrow with my annual tradition of typing W-2s and 1099s.


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