Proposed Federal Budget Could Mean Slower IRS

If the Trump administration gets its way, it might take longer for the IRS to issue tax refunds to taxpayers in the future, because the agency will be taking longer to go over returns.

The proposed budget for fiscal year 2019 that was released by the White House on February 12 includes a $2.3 billion outlay for tax filing and compliance administration and another $110 million to update the IRS’ computer systems. That’s welcome news to the beleaguered agency, which has been hampered by dwindling resources in recent years.

However, some commentators believe the allocation is “too little, too late” to provide much help, especially with complications arising from the mammoth new Tax Cuts and Jobs Act (TCJA).

How will the extra money be spent? The Trump administration has focused on three key aspects in its budget proposals.

1. Fuzzy math: The proposed budget emphasizes several initiatives designed to improve compliance and enforcement. Currently, the IRS has the authority to correct math errors on returns, but not do much more. The White House would allow the IRS to correct other errors on tax returns, although the proposed budget doesn’t provide any insights on the process, other than denying refunds to taxpayers ”who are not eligible.”

According to numbers pitched by the White House, this proposed change would reduce the federal deficit by $305 million between 2019 and 2023. In addition, it would likely reduce the time and money spent on audits. But the extra scrutiny will put the brakes on fast refunds.

Trump’s predecessor as POTUS, Barack Obama, presented a similar initiative for expanding IRS authority to fix errors in his 2017 budget proposal. It didn’t gain much traction back then.

2. Credit ID check-up: The Trump administration also wants to require filers to furnish a valid Social Security number in order to claim the Child Tax Credit (CTC) or Earned Income Tax Credit (EITC).

The TCJA doubled the CTC from $1,000 per qualified child under age 17 to $2,000 per child, beginning in 2018. Of that amount, $1,400 is refundable. The credit is phased out for single filers with an adjusted gross income (AGI) above $20,000 and $400,000 of AGI for joint filers.

As before, the EITC depends on a taxpayer’s AGI and earned income, plus the number of qualified children in the household. For 2018, the maximum credit is $6,444 for a family with three or more qualified children.

Currently, workers who don’t have a Social Security number may claim the credits by providing an Individual Taxpayer Identification Number (ITIN) on their return. This includes U.S. resident aliens. A similar proposal to require Social Security numbers was discussed as part of the TCJA but this requirement didn’t make it into the final version of the law/

3. Tax preparers: Last, but not least, the White House is proposing greater scrutiny of professional tax preparers, through regulation and other means. This comes in the midst of tax return season when the public is bombarded with tax return-based advertisements on the airwaves. The goal is to weed out unscrupulous promoters while giving credence for legit practitioners who have their clients’ best interests at heart.

Again, the Obama administration supported a similar measure just a short time ago. Don’t be surprised if this is approved in some form.

Of course, the proposed budget is a just proposal, and not written in stone. It will be hotly debated and likely modified before it works its way back to the president’s desk.