Tax preparers brace for busy season as short-staffed IRS to leave phone calls unanswered

Tax preparers expect to be inundated with questions from clients about the Affordable Care Act that the short-staffed IRS won’t be able to answer this tax season, which officially starts today.

The much-maligned federal agency, which has 13,000 fewer employees than it did in 2010, won’t have the ability to handle all of the phone calls and mail it’s expected to get this tax season,according to a report last week from the national taxpayer advocate Nina Olson. The report found that the agency will be able to handle only 43 percent of U.S. taxpayers’ phone calls; the IRS itself estimated it could handle 54 percent of its calls.

In some cases, that conundrum will be a boon for tax preparers because more people are expected to turn to professionals to complete their returns to ensure they’re accurate, according to John J. Gray Jr., CPA and managing partner for Hoffman, Eells & Gray CPAs, Canton. But he said staffing woes at the IRS, which has been severely underfunded because of budget cuts, makes it more challenging to serve clients in some cases.

“The IRS has a tax professional hotline, and it’s now taking two to three hours to get a person on that line,” Mr. Gray said, adding that clients often have issues with past tax returns that can be resolved only by the IRS.

He said wait times previously were about three to five minutes on that hotline until about a year and a half ago, when they began to balloon.

“I don’t know what’s going to happen with the latest budget cuts to the IRS, because it’s already bad, and I don’t know if it can be much worse,” Mr. Gray said. “If we have a priority and can’t get answers on the hotline, there’s no way they’re going to get answers on the general public line.”

Each customer service call will cost the IRS $42.33, up from $33.21 in 2013, and wait times will be as long as 19 minutes to talk with an IRS representative, according to the report from the national taxpayer advocate. And letters are expected to go unanswered, as the agency will be able to handle 1.9 million fewer letters than last year.

Faced with uncertainty over the new individual health insurance requirement under the Affordable Care Act, Mr. Gray said he expects more clients to do business this season with the firm, which also has locations in Franklin, Essex and Clinton counties. He said the Canton firm hired two full-time tax preparers for the season to prepare for extra traffic.

“People who have health insurance but don’t file the forms correctly might have to pay a penalty,’ he said. “If you don’t tell the IRS that you have coverage in place, that penalty is going to appear on your return and result in more balance due and less of a refund.”

Because of the health care rollout, the firm has “already had new clients who have asked to come on board before tax season started,” he said.

CLEARING HEALTH CARE CONFUSION

Along with their W-2 form, new enrollees in the ACA will have to file a 1095-A with their tax return this season. And that change is expected to throw some taxpayers off-guard, said JoAnn St. Croix, franchisee of H&R Block who owns offices in Watertown, Evans Mills, Carthage, Adams and Fort Drum.

“People will need to make sure they have health insurance and are able to acquire it if they don’t have it — either through the marketplace, Medicare, an employer or privately,” she said.

All tax professionals at H&R Block have received training to handle health-insurance questions.

Ms. St. Croix estimated that about 20 to 25 percent of people in the north country might not be covered with health insurance this year. She said that although the fine for being uninsured this year is expected to be “relatively small,” it will continue to increase in coming years. The fines are based on personal income and household members, she said.

“Next year, fines will double, and for each year you don’t have health insurance, they will go up,” she said.

Due to changes from the ACA, Ms. St. Croix said, the firm expects to spend a lot more time answering questions about tax returns this season.

“We’ll help anyone with questions, but the expectation that we can help everyone is not realistic,” she said, adding that she expects the firm to be busier as a result of the staffing crunch at the IRS. “But I do believe that because the IRS is being up front about (the problem), people will realize that these aren’t issues they’ve incurred on their own. It’s not a problem with their tax return as much as it is the IRS not being able to handle the volume of calls they used to.”

H&R Block expects to increase its client portfolio by about 10 percent this season in the north country, largely as a result of confusion over the ACA, Ms. St. Croix said.

Michael Crowley, CPA, principal of Crowley & Halloran CPAs in Watertown, said the firm hopes to expand its client size by 10 to 15 percent this season because of new requirements on tax returns introduced by the ACA. He said the IRS’s inability to handle questions is expected to spur more people to seek professional help.

“People that call up the IRS are going to be waiting more, and it means clients will have more questions for us,” Mr. Crowley said. “For the general populace, they’re kind of stuck if they’re not using a tax preparer. … This is the first year of the rollout with the individual mandate for health care, and there may be a large number of people who don’t know about it and want to get their taxes prepared this year.”

It’s a trend that Mr. Crowley said all tax preparers are hoping to capitalize on by expanding their number of clients.

“If we could get another 60 to 65 clients this year, we would be happy,” he said.

Nathaniel J. Carroll, tax accountant and CPA for Bowers & Co. CPAs in Watertown, said he doesn’t expect the ACA will be a major hurdle for taxpayers to handle on their tax returns.

“It boils down to two questions: Were you covered for the year and did you receive any subsidy from the act during the year? It’s just a matter of educating your clients,” he said. “That said, a large portion of the effect is more hype than anything else. It’s probably going to affect less than one out of five people.”

 

 

By Ted Booker, Times Staff Writer