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March 24, 2024Have you done your taxes yet? April 15 is less than a month away.
So far, the IRS says this year's tax filing season is going smoothly. Paper returns are no longer piling up in government cafeterias. And frustrated callers aren't giving up on un-answered phone lines.
The agency is investing billions of dollars to improve customer service, and to go after wealthy tax cheats. And the IRS wants people to know about that.
"Sometimes it's the little things," IRS Commissioner Danny Werfel told an audience at American University last week. "Like that this filing season we added a call-back function on our main 1-800 number, ending the era of taxpayers being required to stay on hold listening to elevator music."
Here are three things to know about this year's tax season.
No more backlog
As of March 15, the IRS had received more than 71 million tax returns — about half the total it expects by the April 15 deadline — and processed 98 percent of them. It helps that nearly all the returns are being filed electronically this year, which cuts down on paper delays.
About 7 in 10 people filing taxes so far are owed refunds. And the average refund is $3109 — 6 percent higher than last year.
Even when everything runs smoothly, though, the tax collector is a punching bag. Commissioner Werfel opened his speech at American University with a video clip from the Simpsons, in which Homer is heard loudly booing the IRS.
Werfel hopes improved service will help. The agency hired thousands of additional telephone operators last year to help answer questions from taxpayers. It's also opened dozens of new walk-in centers around the country. And it's beefing up its website so more people can find information there.
Experimenting with a new free filing service
This year, the IRS is testing a new program that allows taxpayers to file electronic returns directly with the government for free, bypassing commercial tax preparers. It's a limited pilot program, available in only 12 states and only to people with relatively simple tax returns. The formal launch was less than two weeks ago, and since then more than 50,000 people have tried it out.
That's tiny compared to, say, TurboTax, which prepared 45 million returns last year. But if the Direct File pilot is successful, the IRS hopes to expand it, despite stiff opposition from commercial tax prep companies and their allies in Congress.
"Nothing is free," Rep. Carol Miller, R-W.Va., told Werfel during a Congressional hearing last month. "I don't think you should be wasting your millions of dollars when the private industry is doing a good job."
The IRS commissioner has said repeatedly that if people like using commercial software or having an accountant do their taxes, that's fine. Direct File is just one more tool.
"The goal is to provide taxpayers with options," Werfel said. "And what we heard from taxpayers — and we heard it pretty loudly — was that there was an interest in having an option where they could file directly with the IRS for free."
There could be big savings for taxpayers. The average person spends about $140 a year just preparing their taxes.
Cracking down on wealthy tax cheats
For years, the IRS was starved for resources, so a lot of taxes went uncollected. But under the Inflation Reduction Act, Democrats allocated $80 billion for the tax collector over a decade. Some of that money is being spent to go after wealthy individuals and companies that have avoided paying the taxes they owe.
This year the IRS launched audits into the possibly improper use of corporate jets. It's targeting billionaires with delinquent tax bills. And it's zeroing in on 125,000 wealthy individuals who failed to even file tax returns for the last six years.
"We will not allow these higher-income individuals to fail to do their basic civic duty of filing a tax return and paying what they owe," Werfel said.
Congressional Republicans keep chipping away at the IRS budget. They've already trimmed the $80 billion down to $60 billion. In terms of the federal budget, that's counter-productive, since every dollar spent on tax enforcement returns $2 to $6 in additional revenue.
By making a splash with its enforcement actions, the IRS hopes to discourage others from trying to dodge their tax obligations. It also wants to assure everyone who's filing their taxes this spring that others are paying their fair share.
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