The 2015 tax season started without any delay Jan. 20 — allowing filers to send in electronic and paper returns 11 days earlier than last year, according to Forbes. However, the 2015 filing period could be the worst in years — maybe even decades — due to decreases in the IRS budget and reductions in the organization's personnel.
CNN reported that the IRS topline budget has fallen 10 percent for 2015 compared to the budget allotted in 2010, and that change could actually be more dramatic because it does not consider new cost increases the IRS has faced over the five-year period. Moreover, in that same time period, IRS personnel has decreased by 8 percent and funding for staff training has fallen by 85 percent.
National taxpayer advocate Nina Olson predicted that 47 percent of calls to the IRS would not be answered during the tax season and the remaining callers getting through would face wait times of roughly 34 minutes.
IRS Commissioner John Koskinen had a similarly bleak outlook.
"All we can try to do is maximize the resources available in that January to May time frame to make sure that ... we do as well as we can. And 'as well as we can' is still going to be miserable," he said.
Get to Know the Ropes
While the IRS is struggling to answer phones, mistakes on forms may likely result in big delays for refunds. This will be the first year the IRS will have to consider items like premium tax credits and individual mandates under the Patient Protection and Affordable Care Act. With anxiety about rocky beginnings and tax confusion abound, it's important that taxpayers properly study for the 2015 tax season. Here are just a few items to consider this year:
What is the premium tax credit?
The premium tax credit, the health care assistance credit, the health care subsidy — they're all the same thing under different names, according to BankRate. It's the financial aid the federal government has made available specifically to offset the cost of Affordable Care Act-mandated insurance. If you didn't sign up for health insurance on the marketplace, you likely don't have to worry about this tricky item.
Details about your credit are decided by your particular health insurance plan and your income level. In most states, the credit is available to any household that earns income between 100 percent and 400 percent of the poverty line.
The idea is that this tax credit helps low-income individuals pay for the cost of insurance premiums, and according to the Department of Health and Human Services, 85 percent of people who bought policies on the marketplace in 2014 received this assistance.
Most importantly, taxpayers who purchased from the marketplace will get a form 1095-A from that marketplace by Jan. 31, and this document should be filed with other tax materials so individuals can refer to it while filing. The 1095-A helps taxpayers fill out form 8962, which can ensure filers receive the correct amount of advanced premium tax credit.
Consider college tax credits
Taxpayers who attended a university over the past year, or have a son or daughter who was enrolled, should look into tax credits — specifically the American Opportunity Tax Credit. The AOTC is the result of stimulus package legislation from 2008 and 2009, according to Forbes. It was set to expire in 2012, but has been extended until 2017, meaning that parents can still cash in for a few years.
The American Opportunity Tax Credit is worth up to $2,500 per eligible child.
The AOTC covers books, school supplies, necessary class equipment and more, but getting the most out of this tax credit can be tricky as tax-free distributions cannot be used to claim any college tax credits. Forbes recommended speaking with financial planning or tax professionals to plan the best way to pay for higher education using available income, assets and available tax credits. Even families that earn over the $180,000 limit that allows taxpayers to claim the AOTC can encourage their children to claim the credit in certain circumstances.It's worth up to $2,500 per eligible child, making it a more fiscally savvy choice compared to the Lifetime Learning Credit. Form 8863 can be used to claim the AOTC. It's used to pay for qualified educational expenses, which include tuition and other expenses necessary for enrollment and attendance at an eligible college. An eligible college is virtually any post-secondary institution that qualifies for federal student aid program.
From high-income families to individuals below the poverty line, it's important to consider all of the new and complex rules when filing a tax return. Considering all of the little details can make thousands of dollars of difference.