Tax Returns Complicated by Health Care Law and I.R.S. Staff Cuts

FROM THE NEW YORK TIMES:

The filing season for tax year 2014 starts in less than two weeks. While some people won’t have all the forms needed to file their returns until the beginning of next month, there’s good reason to start gearing up now — whether you prepare your own taxes, or pay someone to do it for you.

On the plus side, unlike last year when filing season was delayed by a government shutdown, the Internal Revenue Service says it is on track this year, and will begin accepting electronic tax returns and processing paper forms on Jan. 20.

But a combination of reduced help from the I.R.S., and potential confusion from new tax requirements under the Affordable Care Act, the federal health care law, may mean it could take longer to get your questions answered and file your return.

The I.R.S. has warned that budget cuts and staff reductions are likely to mean fewer customer service representatives answering questions by phone during this year’s tax season, resulting in longer waits on hold. Nearly half of callers to the agency’s toll-free help lines might not get through to a representative, John Koskinen, the I.R.S. commissioner, has said.

“This is not the year to wait until, say, April 10 to decide to do your taxes,” said Marcy Gouge, assistant national director of the AARP Foundation Tax-Aide program, which offers free tax help and return preparation from trained volunteers at more than 5,000 locations nationwide.

A major wrinkle this year is that for the first time, federal taxpayers must address their health insurance status when filing their tax returns. Most taxpayers will simply have to check a box on their return, stating that they have coverage.

But those who enrolled in health coverage on the government exchanges and received a tax credit — as many exchange shoppers did — will have to reconcile their income with their credit, which may affect their tax bill and the size of their refund.

Those who went without insurance for more than three months last year may have to file for an exemption or pay a penalty — which can increase the size of their tax bill or diminish a refund.

The confusion may send more filers to professional tax preparers, which are readying for a banner season. H&R Block, for instance, is promoting a free “A.C.A. Q. and A. Day” on Thursday, to answer questions about how the health care law might affect filers’ returns this year.

Kathy Pickering, executive director of the Tax Institute at H&R Block, said many taxpayers needed to be educated about the penalties that apply for going without insurance, and might need help filing for exemptions. (If filers believe they qualify for certain exemptions, but haven’t yet applied or received approval, the I.R.S. will allow the filer to submit the return with an exemption-pending code, she said.)

The added complexity of the A.C.A., combined with a tougher time getting through to the I.R.S., may drive up the cost of return preparation, since preparers may have to use fee-for-service options to get their questions answered, said Cindy Hockenberry, manager of the Tax Knowledge Center at the National Association of Tax Professionals. The group’s most recent research found the average cost of preparing a Form 1040 with itemized deductions was $200, she said.

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Free tax help is available. Tax-Aide operates many of the locations funded by the I.R.S.’s Tax Counseling for the Elderly program. While particularly suited to help those 60 and older, the locations offer free assistance to low- to moderate-income taxpayers regardless of age, Bonnie Speedy, the national director of Tax-Aide, said.

The I.R.S. no longer offers tax preparation services at its walk-in offices. But it funds the Volunteer Income Tax Assistance program, which provides in-person tax help and return preparation at community-based locations to those making $53,000 or less, seniors and those who are disabled or speak limited English.

You can search on the I.R.S. website for a volunteer location near you. Details vary by location; some sites begin operations on Jan. 20, while others won’t operate until early February. Some sites accept walk-ins, but others require an appointment. So it’s best to check ahead of time.

Here are some answers to common questions about this year’s tax filing season:

■ Where can I get more information about how the A.C.A. may affect my taxes?

The I.R.S. recently made available Publication 5187, Healthcare Law: What’s New for Individuals & Families, on its website.

■ How will I know what information about my A.C.A. plan to include on my tax return?

If you bought a plan through a government marketplace, you should receive a Form 1095-A in the coming weeks, which will have the details of your coverage and premium tax credit. If you don’t receive the form or misplace it, the federal exchange will make them available online as well; online availability at the state-run exchanges varies, Ms. Pickering said.

■ Are there any free options available for filing my taxes electronically?

The Free File Alliance, a partnership between the I.R.S. and 14 tax software companies, offers free online federal tax software and electronic filing for those earning $60,000 or less. (Availability of free state software and filing varies.) The program opens on Jan. 16 and includes offerings from TurboTax, TaxAct and others. To get the free version, make sure you access the software through the I.R.S. Free File website, Tim Hugo, the executive director of the alliance, said.