The IRS has had a lot to contend with this filing season. The monthlong government shutdown hampered the agency’s ability to provide a level of service that would be adequate in a normal year, let alone in a year where taxpayers are learning how to benefit from lower tax burdens under the Tax Cuts and Jobs Act (TCJA). Amid all these issues, Congress, the administration, and the IRS can and should look to extend the filing deadline by a month to May 15.
Even before the shutdown began, there were warning signs that the IRS was not prepared to function at a high level. The software it uses to store taxpayer records is among the oldest in the federal government, and just last year the agency was forced to delay the filing deadline after its tech systems collapsed.
This is not an agency prepared to handle unexpected roadblocks. The 35-day shutdown left the agency on its heels as filing season began: at the start of filing season this year, the IRS answered just 48 percent of calls, compared to 86 percent at the comparable time last year. Average wait times were more than four times higher than last year.
Even a week after the filing season began, the situation was still bleak for taxpayers calling to get help navigating the TCJA’s changes. According to data from the National Taxpayer Advocate, the average speed of answers for the accounts management, automated collection and balance-due lines increased between 151.6 percent and 286.4 percent compared to last year. The percentage of taxpayers receiving help dropped between 40.6 percent and 88.4 percent on these same lines.
Tax practitioners, software providers and CPAs that do much of the legwork of tax filing were similarly hampered. Many of the forms and instructions needed to implement the new provisions of the tax code were not finalized and power-of-attorney forms — documents that allow a tax professional to act on behalf of a taxpayer — weren’t being processed at all during the shutdown.
That’s a serious issue for taxpayers. The TCJA was the biggest comprehensive tax reform legislation since Ronald Reagan was president, and changes to deductions, brackets, rates, exemptions and credits were all significant. Without assistance to be able to determine their legal tax obligations, many taxpayers run the risk of making costly errors that could get them tied up in audit and enforcement actions for years.
Already, the IRS has recognized the difficulties that taxpayers face by lowering the threshold for taxpayers to suffer a low withholding penalty from 90 percent of tax liability to 80 percent. However, more changes are needed to ensure that the IRS does right by taxpayers. That would mean extending the filing deadline by one calendar month to May 15. Other deadlines occurring in the first four months of the year, such as for partnership returns, should also be delayed by one calendar month.
Ideally, such action should come out of Congress. Legislative action would allow for comprehensive solutions to any cash flow concerns that may arise from an extension, while providing certainty for the IRS and taxpayers alike. Already, Representatives Sean Casten and Lauren Underwood, both from Illinois, have filed legislation to extend the individual filing deadline to May 20.
Yet should Congress fail to act, the secretary of the Treasury has authority to provide filing extensions of up to six months. The IRS could also waive penalties for late filing, or further lower the under-withholding penalty threshold as it did earlier this year.
Congressional action would be the cleanest method and the most advisable. But however Congress, the administration and the IRS choose to act, one thing is certain — Uncle Sam has a responsibility to taxpayers to ensure that they are not left out to dry when they try to figure out how to file their taxes under the newer, better tax code enshrined in TCJA.
