Taxpayers will experience
a short delay to the start of the 2014 filing
season, but passage of the Bipartisan Budget Act
of 2013 averted the possibility of an IRS
shutdown in January. The budget agreement,
however, did not include any tax provisions, and
tax reform must find a new vehicle to move
forward in Congress. Meanwhile, the IRS starts
2014 with a new leader, who promised to restore
public trust in the agency after a troubled
2013.
2014 filing
season
To end the October government shutdown, Congress
passed a stop-gap funding bill to keep the IRS
and other federal agencies open through
mid-January 2014. Many tax professional groups
warned that a government shutdown in January,
even for a few days, would result in significant
delays in tax return processing and refunds. The
Bipartisan Budget Act of 2013 authorizes funding
for the federal government for two years.
The start of the 2014
filing season, however, will be slightly delayed
because of the October shutdown. The IRS needs
additional time to reprogram its return
processing systems. The original start date of
the 2014 filing season was January 21, 2014. In
December, the IRS announced that the 2014 filing
season will start on January 31. The IRS will
not process any returns (electronic or paper)
before January 31, 2013.
Most business filers can
begin filing 2013 returns on January 13, the IRS
reported. These include filers of Forms 1120,
U.S. Corporation Income Tax Return; 1120S, U.S.
Income Tax Return for an S Corporation; and
1065, U.S. Return of Partnership Income.
However, the January 13 start date does not
apply to business owners that report their
incomes on Form 1040. They must wait until
January 31.
Tax legislation
Many tax reform proposals were introduced in
Congress in 2013 but lawmakers deferred action
until 2014. The leaders of the House and Senate
tax writing committees have both said they want
to move tax reform legislation in 2014 but the
extent of any reform—and overall enthusiasm in
Congress for reform—is unclear. Some lawmakers
want a complete overhaul of the Tax Code (the
last major tax reform was in 1986); others want
to a more piece-meal approach. Lawmakers are
also divided over whether reform should be
revenue neutral or if reform should raise new
revenues.
There had been some
expectation that the budget agreement would
include tax provisions, especially the so-called
tax extenders. These are popular but temporary
incentives, such as the higher education tuition
deduction, state and local sales tax deduction,
transit benefits parity, teacher’s classroom
expense deduction, research tax credit, and
more. The budget agreement negotiators decided
not to include the extenders, which have now
expired. Congress is likely to extend the
incentives retroactive to January 1, 2014. If
you have any questions about the status of an
extender, please contact our office.
Looking ahead, President
Obama is expected in his State of the Union
Address in January and FY 2015 budget proposals
to again call for a reduction in the corporate
tax rate in exchange for eliminating some
business tax incentives. The President made the
same proposal last year but it failed to gain
traction in Congress. The President is also
likely to urge Congress to renew tax incentives
that encourage employers to hire military
veterans and individuals from
economically-disadvantaged groups, consolidate
some taxpayer penalties, extend enhanced small
business expensing (and possibly bonus
depreciation) and more. Our office will share
details of the President’s proposals as they are
released.
New IRS
Commissioner
In May—after news broke of the IRS selecting
applications from conservative groups for
tax-exempt status for extra scrutiny—President
Obama appointed Daniel Werfel to serve as Acting
Commissioner. The President instructed Werfel to
launch a top-down review of the agency. Since
May, several senior IRS executives resigned or
retired and Werfel appointed new top managers.
Werfel also instituted cost-saving measures,
such as eliminating employee conferences,
curbing employee travel and not paying bonuses.
Werfel, however, was never intended to serve
permanently at the IRS and President Obama
nominated John Koskinen to be Commissioner. The
Senate approved Koskinen’s nomination in
December.
Koskinen comes to the IRS
after serving as the non-executive chair of
Freddie Mac from 2008 to 2011. Previously,
Koskinen was deputy mayor ofWashington,D.C.and
also was a senior manager at the Office of
Management and Budget (OMB). At his confirmation
hearing, Senate Finance Committee (SFC) Chair
Max Baucus, D-Montana, called Koskinen “the type
of leader we need at the IRS.” SFC Ranking
Member Orrin Hatch, R-Utah, reminded Koskinen
that he has a “difficult job ahead” and “it is
vital that the IRS maintain its credibility with
taxpayers.” Koskinen told lawmakers that “trust
is the most important asset the IRS has.”
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