Internal Revenue Service Begins Tax Filing Season, Provides Advice

As the 2020 tax filing season begins, U.S. government officials look at the 2019 filing season for lessons learned and offer advice.

In a 27 January 2020 release, the U.S. Internal Revenue Service announced that it is now accepting 2019 income tax returns, and provided information and advice about filing.  (See IR-2020-20, https://www.irs.gov/newsroom/irs-kicks-off-2020-tax-filing-season-with-returns-due-april-15-help-available-on-irsgov-for-fastest-service.) 

On the same day, the Treasury Department Inspector General for Tax Administration (TIGTA) released a comprehensive report on the results of the 2019 filing season. (See https://www.treasury.gov/tigta/auditreports/2020reports/202044007fr.pdf.)

Filing Logistics and Advice

2019 individual tax returns will be due by Wednesday, 15 April 2020. IRS expects more than 150 million returns, with most coming before that 15 April deadline. About 90% of those returns will be filed electronically.

As usual, a high percentage of taxpayers will be claiming a refund. The Inspector General report says that for 2018, as of May the IRS had processed over 140 million returns, of which about 100 million required a refund. IRS refunded some $274 billion, with the average refund $2,732.

IRS says that most refunds will be sent within 21 days, but cautioned that some returns require further review, for example those with errors, or which are incomplete, or are possibly affected by identity theft or fraud. IRS strongly advises taxpayers to make sure they have all year-end statements in hand before filing, and review them for accuracy.

IRS also reminded taxpayers who have Individual Taxpayer Identification Numbers (ITINs), which would include for example workers in the U.S. from other countries who do not have Social Security numbers, that many of those numbers expired on December 31, 2019. For example, an ITIN not used on a tax return at least once in the past three years automatically expires. Any taxpayers affected must act soon to obtain renewal of expired ITINs.

IG Reviews 2019 Tax Filing Performance

The Inspector General Report generally gave the IRS high marks for successfully executing the 2019 filing season in the face of the changes required by the Tax Cuts and Jobs Act (TCJA) (For example, IRS needed 48 new products, 494 revisions to existing products, and programming for some 69 new provisions as a result of the new law.), a 35-day government shutdown that severely impacted availability of IRS workers, and a substantial revision of the Form 1040.

However, it noted a number of areas in which IRS can improve. In areas of interest to the mobility industry, TIGTA concluded that tens of thousands of tax returns were erroneously allowed to claim unreimbursed employee business expenses as adjustments to income, and that over 12,000 returns appeared to include an erroneous deduction for moving expenses. Both of those deductions were suspended for most taxpayers through 2025 by the TCJA.

The filing season for 2018 also revealed that many taxpayers experienced unexpected underpayments due to TCJA changes. IRS relieved many of estimated tax penalties by changing the percentage of current year tax that must be paid through withholding or estimated tax payments from 90% of the amount ultimately due to 85%, and then to 80%. For 2019, IRS revised the Form W-4 withholding form, and engaged in intensive education to try to prevent similar underpayments for 2019. The results of that effort will not be clear until the filing season is well underway, nor is it clear whether IRS will again provide any relief.

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How This Impacts Mobility

Many transferees were among those whose tax liability was unexpectedly high for 2018, due to limitation or elimination of some deductions that affected them. As they begin filing for 2019, companies will need to keep an eye on whether this issue persists, and potentially adjust gross-ups to accommodate such transferees.

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