Democratic lawmakers and taxpayer rights advocates are stepping up their calls for the IRS and Congress to provide more help for taxpayers during a filing season challenged by President Trump’s tax law and the recent government shutdown.
Some want Congress and the IRS to extend the filing deadline. And lawmakers and advocates are pushing for additional penalty relief for people who did not pay enough in taxes during the year because of withholding changes.
“Filing season is now in full swing, and I urge the House to act as soon as possible to ensure that these complying taxpayers are not penalized any further,” Rep. Judy Chu (D-Calif.) said at a hearing Thursday.{mosads}
Taxpayers and the IRS have faced a unique set of challenges this filing season.
This year is the first time taxpayers are filing taxes that reflect much of the tax law Trump signed in December 2017. Many taxpayers have questions about the new law, and the IRS has had to update its forms and prepare accordingly.
Additionally, the 35-day partial government shutdown, during which most IRS employees were furloughed or working without pay, ended just before the filing season began. The shutdown resulted in the IRS having lower levels of service on its telephone lines and a backlog of correspondences.
Lawmakers and advocates have been paying close attention to issues taxpayers are encountering this year, and they are pushing for action to help address taxpayers’ problems.
A top priority for many Democrats is providing additional penalty relief for taxpayers who underpaid their taxes throughout the year.
The IRS issued guidance early last year to update taxpayers’ withholding to reflect key parts of the 2017 tax law. The Treasury Department estimated last year that 21 percent of wage earners would owe the IRS money under the new guidance, compared to 18 percent if the tax law hadn’t been enacted.
Most people are getting a tax cut, and people may have gotten a tax cut even if they have to pay the IRS money instead of receiving a refund. But taxpayers often count on refunds, and Democrats have expressed concerns about taxpayers who now have a balance due and are facing penalties as a result.
The IRS announced in January that it would waive penalties for some taxpayers, but Democrats want the agency to do even more.
A group of Senate Democrats last month sent a letter to the Treasury Department and the IRS asking for more taxpayers to be eligible for penalty relief, arguing that the administration manipulated the withholding tables so taxpayers would have bigger paychecks ahead of the midterm elections.
The Treasury Department responded to the letter by mentioning the penalty relief it has already provided and by calling accusations that the withholding tables were manipulated for political reasons “misinformed, baseless, and false.”
Democrats are also pushing legislation to increase the number of taxpayers who would receive penalty relief, with Chu offering a bill on this topic in the House and Sen. Kirsten Gillibrand (D-N.Y.) introducing a version of the bill in the Senate. The bill is backed by the American Institute of Certified Public Accountants.
National Taxpayer Advocate Nina Olson, the IRS’s in-house watchdog, said at Thursday’s hearing that she thinks the agency “should do whatever is within its administrative ability to provide relief.” She also said it would be positive if Congress took action.
“I just think that would calm everybody down,” she said.{mossecondads}
Some lawmakers and stakeholders also have suggested that Congress and the Trump administration consider extending the April 15 tax filing deadline in light of the government shutdown.
Freshmen Reps. Sean Casten and Lauren Underwood, both Illinois Democrats, introduced legislation earlier this week to extend the filing season deadline until May 20.
Casten told The Hill on Friday that the idea behind his bill is to provide more time “to make sure that everybody pays or gets the refund that they deserve and that we do this the right way.”
Casten and Underwood both represent Chicago suburbs where people are upset about the new tax law’s $10,000 cap on the state and local tax deduction.
While the full deduction won’t be restored before the end of the filing season, Casten said his bill can ensure that people who are trying to figure out how their taxes changed can get their questions answered before they submit their returns.
Separately, the National Taxpayers Union Foundation (NTUF) — a right-leaning group that often delves into tax administration issues — released a report Thursday recommending that Congress and the IRS look at extending the tax deadline by one month because of the shutdown.
NTUF Executive Vice President Andrew Moylan said it’s unfortunate revenue collection could continue through the shutdown while some of the protections for taxpayers did not. He said the shutdown resulted in issues for both taxpayers and tax practitioners and that not all issues would be resolved by having taxpayers request extensions.
“To some extent, the IRS has done an admirable job in trying to play catch-up, but at the end of the day, an admirable job isn’t good enough, and it’s not sufficient to solve all the problems that were created for taxpayers,” he said.
NTUF said it would be best if Congress took action to extend the filing deadline since that would allow lawmakers to provide guidance to the Treasury Department and to ensure an extension wouldn’t hurt the federal government’s balance sheet.
But it could be challenging to get an extension of the filing deadline through Congress. A spokesman for Senate Finance Committee Chairman Chuck Grassley (R-Iowa) said the senator doesn’t think Congress should consider an extension.
“The shutdown ended before the beginning of filing season, and by all measures filing season is running smoothly so far,” Grassley spokesman Michael Zona said.
Another option would be for the Treasury Department and the IRS to take administrative action, though they may be limited in their authority to do so.
Moylan said he thinks the IRS generally doesn’t have the ability to move the filing date but that the agency could do other things to approximate doing so, such as granting extensions or waiving penalties.
Olson noted the IRS extended the filing deadline by one day last year because of a technology problem but said the agency has said its authority to do that is very narrow. She told reporters after Thursday’s hearing that she doesn’t know whether the IRS has the authority to extend the deadline because of the shutdown since the filing season began on time.
“We opened the filing season the day that we intended to open the filing season,” she said.